Legendary investor Jeremy Grantham made an accidental $265 million profit on a SPAC bet after previously criticizing blank-check companies

<p><img src="https://static3.businessinsider.com/image/5fd0c84dcee0cf00114fa564-1024/GettyImages-148203941.jpg" border="0" alt="Jeremy Grantham" data-mce-source="Matthew Lloyd/Getty Images for ReSource 2012" data-link="https://www.gettyimages.com/photos/jeremy-grantham'agreements=pa:75750&amp;family=editorial&amp;phrase=jeremy%20grantham&amp;sort=best#license"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><ul><li><strong>Jeremy Grantham's early stake in battery producer <a href="https://markets.businessinsider.com/stocks/qs-stock">QuantumScape</a> has surged following the firm's merger with a special-purpose acquisition company, but Grantham still isn't sold on the blank-check IPO trend.</strong></li><li><strong>Grantham invested $12.5 million into the company seven years ago. That stake now stands at roughly $278 million thanks to a SPAC merger and QuantumScape's subsequent stock rally.</strong></li><li><strong>The position is "by accident&nbsp;the single biggest investment I have ever made," Grantham told the <a href="https://www.ft.com/content/faedd2a1-2008-4f1e-9198-7694fba791b0">Financial Times</a>.</strong></li><li><strong>Still, the investor sees SPACs as a&nbsp;"reprehensible instrument, and very very speculative by definition," largely due to their lack of listing requirements and overall regulation.</strong></li><li><strong><a href="https://www.businessinsider.com/'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingestutm_source=msn.com&amp;utm_medium=referral&amp;utm_content=msn-slideshow&amp;utm_campaign=bodyurl'utm_source=markets&amp;utm_medium=ingest">Visit the Business Insider homepage for more stories</a>.</strong></li></ul><hr><p>The very kind of dealmaking that Jeremy Grantham previously deemed "reprehensible" netted the famous investor a $265 million profit.</p><p>Grantham, who founded investment management firm GMO and serves as its long-term investment strategist, invested $12.5 million in battery producer <a href="https://markets.businessinsider.com/stocks/qs-stock">QuantumScape</a> seven years ago as one of several stakes in early green-tech companies, according to the <a href="https://www.ft.com/content/faedd2a1-2008-4f1e-9198-7694fba791b0">Financial Times</a>. The position swelled after Kensington Capital Partners announced plans to merge QuantumScape with a special-purpose acquisition company, or SPAC, in September.</p><p>The deal valued QuantumScape at $3.3 billion, and shares traded at more than four times their listing price when the acquisition was completed on November 30. The company's stock rallied another 31% on Tuesday alone, valuing Grantham's stake at roughly $278 million.</p><p>Yet the legendary investor isn't convinced Wall Street's SPAC frenzy will last. The QuantumScape position is "by accident the single biggest investment I have ever made," Grantham told the FT, partially fueled by the so-called blank-check companies' lack of regulation.</p><p>"It gets around the idea of listing requirements, so it is not a useful tool for a lot of successful companies. But I think it is a reprehensible instrument, and very very speculative by definition," he added.</p><p><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/top-wall-street-investors-of-2020-stock-picks-2021-outlook-2020-12" data-analytics-position="1" data-analytics-module="">We spoke with Wall Street's 9 best-performing fund managers of 2020 to learn how they crushed the chaotic marketand compile the biggest bets they're making for 2021</a></em></p><p>Grantham's profit stands to climb even higher. QuantumScape soared as much as 37% in early Wednesday trading. Should the rally hold into the market close, it would add another $100 million to his total gains.&nbsp;</p><p>SPAC firms raise capital through an initial public offering with the intention of using the cash to acquire a firm and take the merged entity public. The last two years have seen market favorites including Virgin Galactic, DraftKings, and Nikola go public through such deals.</p><p>Blank-check IPOs exploded in 2020 as firms looked to take advantage of a surge in participation from retail investors and hopes for an economic recovery. More than $74 billion has been raised across 218 SPAC debuts in 2020, according to data from <a href="https://spacinsider.com/stats/">SPACInsider.com</a>. That compares to just $13.6 billion raised across 59 deals in 2019.</p><p>Wall Street's obsession with the vehicles could be a sign of unsustainable market optimism, Grantham told the FT, rivaling the overwhelming bullishness seen during the 1920s and the late-1990s tech bubble.</p><p>Tesla's meteoric rise through the year has made electric-vehicle SPACsand any SPAC related to the EV marketparticularly popular. QuantumScape lands in that basket. The firm produces solid-state batteries used in electric cars and has backing from industry giant Volkswagen.</p><p><em><strong>Now read more markets coverage from Markets Insider and Business Insider:</strong></em></p><p><em><strong><a href="https://markets.businessinsider.com/news/stocks/doordash-ipo-stock-offering-price-filing-dash-trading-debut-nyse-2020-12-1029875380" data-analytics-position="1" data-analytics-module="">DoorDash prices IPO at $102 per share, will raise $3.4 billion</a></strong></em></p><p><em><strong><a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-stretched-investor-positioning-sp500-strategy-goldman-sachs-2020-12-1029874597" data-analytics-position="3" data-analytics-module="">Stocks could stumble in early 2021 as investor sentiment surges past market fundamentals, Goldman Sachs says</a></strong></em></p><p><em><strong><a href="https://www.businessinsider.com/investing-strategy-hedge-fund-managers-trades-bets-2020-emmet-peppers-2020-12" data-analytics-position="3" data-analytics-module="">Emmet Peppers grew his accounts from $30,000 in 2010 to over $70 million this year. The newly minted hedge fund manager breaks down how he spotted early opportunities in Tesla, Facebook, and the COVID-19 market crash,and shared one IPO on his radar.</a></strong></em></p><p><a href="https://www.businessinsider.com/jeremy-grantham-accidental-millions-profit-quantumscape-spac-blank-check-deal-2020-12#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/pikes-peak-hill-climb-colorado-most-dangerous-racetrack-2020-2">Why Pikes Peak is the most dangerous racetrack in America</a></p>
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