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Goldman Sachs says these are the top 15 SPACs hedge funds are betting on right now, as roughly 5 go public each trading day

Published by Business Insider on Mon, 22 Feb 2021


<p><img src="https://static3.businessinsider.com/image/5f0d9fedf0f41967fa3188a4-597-448/2015-11-10t000000z1496569582gf20000053711rtrmadp3usa-stocks.jpg" border="0" alt="Bill Ackman" width="597" height="448" data-mce-source="REUTERS/Brendan McDermid"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>The boom in blank-check companies is showing no signs of slowing down. Roughly five special purpose acquisition companies have gone public every trading day this year, according to Goldman Sachs.</p><p>This isn't surprising. It seems like almost every day, a celebrity, or big name investor, is making the headlines with the launch of a new SPAC, such as <a href="https://www.businessinsider.com/colin-kaepernick-spac-blank-check-company-social-purpose-mission-advancement-2021-2">Colin Kaepernick</a> or <a href="https://www.businessinsider.com/shaq-mlk-disney-execs-forest-road-spac-blank-check-launch-2020-10">Shaquille O'Neal</a>.</p><p>The legal structure is even making its way into pop culture, featuring in a rap by artist Cassius Cuve called "SPAC dream", which has over <a href="https://www.youtube.com/watch'v=9rHkXfaIRTM&amp;feature=emb_title">113,000 views</a> on YouTube.</p><p>"If you in the SPAC game you know what I'm talking about. We sick of IPOs day one locking us out," Cuve said in his song.</p><p>Now the spotlight is on hedge funds and their interest in SPACs.</p><p>"Hedge funds have embraced the ongoing SPAC boom and so far have been rewarded for that decision," said Goldman Sachs analyst Ben Snider in the February 19 note.</p><p>Hedge funds have recently released their fourth-quarter 13Fs, a type of quarterly report that is required to be filed by all institutional investment managers with at least $100 million in assets under management. The documents provide insight into the firms' US equity holdings.</p><p>Each quarter, Goldman Sachs analyzes 820 hedge funds equity positions based on their 13F filings as of February 16.&nbsp;</p><p>This quarter, the report found that hedge funds were still committed to growth stocks. The same five stocks (Amazon, Microsoft, Facebook, Google and Alibaba) still rank in Goldman Sachs' list of the most popular hedge fund longs for the 10th straight quarter and leverage still remains close to record highs, despite the recent Gamestop short squeeze.</p><p>The new addition to this quarter's report is hedge funds' embrace of SPACs and how they are benefitting hedge fund portfolios.</p><p>"These SPACs have generated a median YTD return of 8%, an average return of 48%, and only one has posted a decline (just -2%)," Snider said.</p><p>One SPAC, <a href="https://markets.businessinsider.com/stocks/cciv-stock">Churchill Capital Corp IV (CCIV)</a>, even made it into Goldman Sachs hedge funds' very important positions list, which is the top 50 long positions of fundamentally driven hedge funds.</p><h2>What is a SPAC'</h2><p>That's a question a lot of investors have been asking. There has been a significant uptick in google searches asking what is a SPAC.</p><p><img src="https://static6.businessinsider.com/image/6033971f623bd30012bcc7c6-1030/Screenshot 2021-02-22 at 070523.png" border="0" alt="Google search trends on SPACs from Goldman Sachs January 27 research note" width="494" height="313" style="display: block; margin-left: auto; margin-right: auto;" data-mce-source="Goldman Sachs" data-mce-caption="Google search trends on SPACs from Goldman Sachs January 27 research note"></p><p>"I'm like a SPACwhat the hell's that' You get in on the ground floor. It paid big, so I searched and then I found more," Cuve said in his rap explaining the structure.</p><p>But more simplistically, a SPAC is formed by a group of investors with a strong background in a particular area. Together they raise money from other investors to acquire an existing private company with the aim of taking it public. Individuals are investing based on the reputation of the investment team and pay $10 a share.</p><p>The legal structure became more mainstream in 2020 as big name investors got involved, such as Chamath Palihapitiya and Bill Ackman. Sports betting app <a href="https://markets.businessinsider.com/stocks/dkng-stock">DraftKings (DKNG)</a> is one of the most well-known companies to have leveraged the SPAC structure to go public.</p><p>SPAC launches in 2020 more than tripled from 2019, according to <a href="https://spacinsider.com/stats/">SPAC Insider</a>. Goldman Sachs analysts said SPACs make up around 59% of total US IPO capital raising in 2020.</p><p><img src="https://static1.businessinsider.com/image/603397ce623bd30012bcc7c7-1022/Screenshot 2021-02-22 at 070244.png" border="0" alt="US SPAC capital raised graph from Goldman Sachs February 19 note" width="430" height="355" style="display: block; margin-left: auto; margin-right: auto;" data-mce-source="Goldman Sachs" data-mce-caption="US SPAC capital raised graph from Goldman Sachs February 19 note"></p><p>This year, roughly five SPACs have gone public every trading day.</p><p>On January 27 , Goldman Sachs equity analyst David Kostin and his team provided a report on SPAC issuance and the outlook for 2021. In the report, Kostin said the current pace of five IPOs a day is unsustainable.</p><h2>So, why the sudden SPAC boom'</h2><p>Part of the reason both hedge funds and retail investors are flocking to SPACs is the near-zero interest rate environment.</p><p>Firstly, investors' money is held in an interest-bearing trust account, usually short-dated US Treasury bills, and can only be used to acquire a company, or to return to shareholders. The rate in the account is between 0 to 25 basis points, which Goldman Sachs economists forecast will be on hold until 2024.&nbsp;</p><p>Investors receive a minimal yield on the initial investment as they wait for a sponsor to identify a potential target and then have a put option to redeem their shares with accrued interest if they do not like the acquisition, Kostin said. They can also keep accompanying warrants whether they continue with the investment or redeem shares.</p><p>"SPACs can act as a cash substitute with equity upside when fed funds are at the lower bound," Kostin said.</p><p>Bank of America echoed these principles in a primer on SPACs on February 19.</p><p>"We attribute the market's growth to a number of factors, including institutional investors seeking alternative sources of yield, private companies pursuing an alternative to the costly and time consuming IPO process, and retail investors (with a penchant for risk) aiming to access private assets, which historically have been out of reach," Bank of America cross-asset strategy analyst Michael Carrier said.</p><p>Carrier says the benefits for investors as limited downside risk, liquidity, a known time limit and an opportunity to invest in pre-IPO deals. However, he also notes risks for investors range from misaligned interests, to target company quality to sponsor and opportunity cost.</p><p>In January, Kostin said in conversations with portfolio managers, many cite the boom in SPACs as an example of exuberant investor behavior.</p><p>However, it is not only retail investors who are getting involved. It's hedge funds too.</p><p>"To illustrate, take the perspective of a hedge fund that purchased units during the SPAC's IPO. If the share price pops in response to the deal announcement, the hedge fund can sell its shares for a gain, but if the share price declines below the IPO price it can redeem for its share of the cash in the trust account-regardless, it can keep the warrants to retain exposure to the new company at no cost, allowing for potential upside with no downside risk. The ability to redeem is utilized often," Carrier said. "In fact, according to a recent Stanford and NYU Law study(*), a median of 73% of SPAC IPO proceeds were returned to shareholders via redemptions during 2019 and the first half of 2020."</p><p>In Carrier's primer, he notes hedge funds and convertible arbitrage funds are some of the largest investors in SPACs. His research shows 10 hedge funds owned more than a quarter of all SPAC securities, as of the third quarter of 2020.</p><p>Insider breaks down the most popular SPACs with hedge funds, according to Goldman Sachs, based on 13Fs filed as of February 16.</p><h2>Hedge funds top picks:</h2><h3>1. Pershing Square Tontine Holdings Ltd</h3><img src="https://static3.businessinsider.com/image/60338a42623bd30012bcc7a7-400-300/1-pershing-square-tontine-holdings-ltd.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/psth-stock">PSTH</a></p><p><strong>IPO date:</strong> July 22, 2020</p><p><strong>Year-to-date return:</strong> 8%</p><p><strong>Number of hedge fund owners:</strong> 37</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>2. Churchill Capital Corp IV</h3><img src="https://static1.businessinsider.com/image/603389f4bed5c50011a2bc47-400-300/2-churchill-capital-corp-iv.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/cciv-stock">CCIV</a></p><p><strong>IPO date:</strong> July 30, 2020</p><p><strong>Year-to-date return:</strong> 480%</p><p><strong>Number of hedge fund owners:</strong> 34</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>3. Foley Trasimene Acquisition Corp</h3><img src="https://static4.businessinsider.com/image/60338a98623bd30012bcc7a9-400-300/3-foley-trasimene-acquisition-corp.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/wpf-stock">WPF</a></p><p><strong>IPO date:</strong> May 26, 2020</p><p><strong>Year-to-date return:</strong> -2%</p><p><strong>Number of hedge fund owners:</strong> 31</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>4. Cohn Robbins Holdings Corporation</h3><img src="https://static3.businessinsider.com/image/60338aea623bd30012bcc7aa-400-300/4-cohn-robbins-holdings-corporation.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/crhc-stock">CRHC</a></p><p><strong>IPO date:</strong> September 8, 2020</p><p><strong>Year-to-date return:</strong> 8%</p><p><strong>Number of hedge fund owners:</strong> 28</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>5. Artius Acquisition Inc</h3><img src="https://static1.businessinsider.com/image/60338b5a623bd30012bcc7ab-400-300/5-artius-acquisition-inc.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/aacqu-stock">AACQ</a></p><p><strong>IPO date:</strong> July 13, 2020</p><p><strong>Year-to-date return:</strong> 20%</p><p><strong>Number of hedge fund owners:</strong> 26</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>6. Jaws Acquisition Corp</h3><img src="https://static2.businessinsider.com/image/60338ba3623bd30012bcc7ac-400-300/6-jaws-acquisition-corp.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/jws-stock">JWS</a></p><p><strong>IPO date:</strong> May 13, 2020</p><p><strong>Year-to-date return:</strong> 10%</p><p><strong>Number of hedge fund owners:</strong> 26</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>7. Foley Transimene Acquisition Corp II</h3><img src="https://static4.businessinsider.com/image/60338bf6623bd30012bcc7ad-400-300/7-foley-transimene-acquisition-corp-ii.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/foley_trasimene_acquisition_a_2-stock">BFT</a></p><p><strong>IPO date:</strong> August 18, 2020</p><p><strong>Year-to-date return:</strong> 12%</p><p><strong>Number of hedge fund owners:</strong> 25</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>8. E Merge Technology Acquisition Corp</h3><img src="https://static2.businessinsider.com/image/60338c4c623bd30012bcc7ae-400-300/8-e-merge-technology-acquisition-corp.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/etac-stock">ETAC</a></p><p><strong>IPO date:</strong> July 30, 2020</p><p><strong>Year-to-date return:</strong> 3%</p><p><strong>Number of hedge fund owners:</strong> 24</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>9. Go Acquisition Corp</h3><img src="https://static4.businessinsider.com/image/60338c94623bd30012bcc7af-400-300/9-go-acquisition-corp.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/goac-stock">GOAC</a></p><p><strong>IPO date:</strong> August 4, 2020</p><p><strong>Year-to-date return:</strong> 4%</p><p><strong>Number of hedge fund owners:</strong> 24</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>10. CC Neuberger Principal Holdings II</h3><img src="https://static2.businessinsider.com/image/60338ce2623bd30012bcc7b2-400-300/10-cc-neuberger-principal-holdings-ii.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/prpb-stock">PRPB</a></p><p><strong>IPO date:</strong> July 30, 2020</p><p><strong>Year-to-date return:</strong> 8%</p><p><strong>Number of hedge fund owners:</strong> 23</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>11. RedBall Acquisition Corp</h3><img src="https://static6.businessinsider.com/image/60338d2abed5c50011a2bc4b-400-300/11-redball-acquisition-corp.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/rbac-stock">RBAC</a></p><p><strong>IPO date:</strong> August 12, 2020</p><p><strong>Year-to-date return:</strong> 0%</p><p><strong>Number of hedge fund owners:</strong> 23</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>12. Dragoneer Growth Opportunities Corp II</h3><img src="https://static3.businessinsider.com/image/60338d76623bd30012bcc7b4-400-300/12-dragoneer-growth-opportunities-corp-ii.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/dgns-stock">DGNS</a></p><p><strong>IPO date:</strong> November 16, 2020</p><p><strong>Year-to-date return:</strong> 11%</p><p><strong>Number of hedge fund owners:</strong> 22</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>13. CHP Merger Corp</h3><img src="https://static3.businessinsider.com/image/60338db0623bd30012bcc7b9-400-300/13-chp-merger-corp.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/chpm-stock">CHPM</a></p><p><strong>IPO date:</strong> November 22, 2019</p><p><strong>Year-to-date return:</strong> 4%</p><p><strong>Number of hedge fund owners:</strong> 21</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>14. Juniper Industrial Holdings Inc</h3><img src="https://static2.businessinsider.com/image/60338df2623bd30012bcc7ba-400-300/14-juniper-industrial-holdings-inc.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/jih-stock">JIH</a></p><p><strong>IPO date:</strong> November 7, 2019</p><p><strong>Year-to-date return:</strong> 33%</p><p><strong>Number of hedge fund owners:</strong> 21</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/><h3>15. Star Peak Energy Transition Corp</h3><img src="https://static3.businessinsider.com/image/60338e42623bd30012bcc7bb-400-300/15-star-peak-energy-transition-corp.jpg" alt="" /><p><p><strong>Ticker:</strong> <a href="https://markets.businessinsider.com/stocks/stpk-stock">STPK</a></p><p><strong>IPO date:</strong> August 17, 2020</p><p><strong>Year-to-date return:</strong> 114%</p><p><strong>Number of hedge fund owners:</strong> 21</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/>
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