Here’s Exactly How the Top Investors Are Trading SPACs


As the SPAC explosion continues around us, I feel like something of a frustrated Prophet.

I have explained endlessly the right way to trade SPACs. I have tossed some discounted picks on the table where it would be almost impossible to lose money. All of them are up (for example CCIV), although that’s not that impressive given the madness going on in the SPAC space at the moment.

I have laid out the process again and again.

  1. Buy at the value of the trust or less. If you can get IPO shares, that’s okay as well. 
  2. If the stock pops, sell it or put in a trailing stop.
  3. If the market hates the deal, redeem your shares for the trust value and get your original investment back. If you bought in the aftermarket at a discount, you get your money back and a small profit to book.

You can read the one-page instruction manual here. If you can’t read, leave the basement and ask your MOM to read it to you.

Investing In SPACs the Way the Pros Do It

I keep throwing the playbook out there and then keep seeing the internet wondering if there are any good SPACs trading between $12 and $15.

I get it…

This strategy may not be as interesting as betting big on which SPAC might back the next Tesla (TSLA), or become the company that solves our energy storage needs forever, but it is consistently profitable and it is the way the pros do it.

Consider Apollo Management. Apollo is a private equity firm that has been around since the founders walked away from the Drexel Burnham fiasco. These guys are so cold-blooded about making money that their first big success as private equity investors was paying pennies of the dollar for busted junk bond deals they had helped put together as bankers at Drexel.

When I was reading their 13F this week to see what public equities they might be buying or selling (it turns out Apollo is very good at investing in public companies as well as private ones), it became evident that they are trading SPACs the same way I do…

The same way I have been recommending to my readers to trade SPACs…

Apollo is in SPACs in a big way and has been for the past year. Looking at their 13F, you can clearly see that they are buying a lot of SPAC IPOs. You can also clearly see they are selling SPACs that have made a deal or that have popped on rumors of a deal.

They are not hanging around to see how the company does after the deal is closed.

They are not betting on unicorn-inspired hopes and dreams. 

It’s simply pop, sell, and onto the next deal.

Apollo knows more about making deals than just about anyone on the planet. If they are not betting on the potential of a closed SPAC deal, why are you?

Do you know who else is playing the SPAC game this way?

Boaz Weinstein of Saba Capital.

Weinstein is one of the smartest traders on the planet right now. In 2012 he was one of the traders on the other side of the London Whale’s disastrous bets that ended up costing JP Morgan (JPM) more than $6 billion.

Last year he cleared over 80% in his main fund at Saba, as he bet against junk bonds early in the year.

He is also big on closed-end fund activism, which we are also fond of as a core investing strategy.

And of course, he is big on SPACs as well. Again, tracking his 13F clearly shows he is playing the same way I am. Buy cheap, sell the pop. If it doesn’t pop, redeem it and get your money back.

Saba is even starting a SPAC fund. The offering literature says that they will not pay over 105% of the trust value for any SPAC. They expect to hold less than 5% of the SPACS they buy past the redemption date for trust shares. 

Sell the pop or redeem.

The list goes on. Seth Klarman at Bulldog Investors trades SPACs this way. So does Phillip Goldstein over at Bulldog Investors.

The equities division of Paul Tudor Jones is also trading SPACs in this fashion.

The list goes on and on.

You can go on betting that your SPAC will be the next big thing, but odds are it will not. 

Don’t miss out on the opportunity to make a lot of money investing in SPACs the right way.