A lot happened in 2020, to say the least. But it was also the year of the special purpose acquisition company (or SPAC), also known as a “blank check company.” These are holding companies that go public with essentially no business attached. Their sole purpose is to raise money through an initial public offering in order to eventually purchase a private company and essentially take it public.
The capital is raised through shares and warrants, and SPACs typically only have a certain amount of time (usually two years) to buy a company, or they have to return the capital to shareholders.
One thing investors in SPACs should keep in mind is that if the SPAC fails to merge with a private company, it will return investors’ money, but only the amount that shares were initially offered at. So, if a SPAC goes public at $10 per share and you buy shares later on for a premium at $13 per share, you would lose $3 for each share of the SPAC you bought if it doesn’t make a deal happen.
This year, there were 165 SPACs listed through October, nearly double the amount in 2019. Here are three of the top-performing SPACs that have seen their shares shoot up in 2020.
1. Switchback Energy Acquisition
About a year after going public (September 2020), Switchback Energy signed a business combination with an electric charging company called ChargePoint. Valued at $2.4 billion overall, the deal will provide ChargePoint with $493 million to continue to develop and advance its commercial and residential business.
Investors love this deal. Since the start of September, shares of Switchback are trading around $44, up about 323% in just a few months. Management recently filed to raise $250 million and launch another SPAC called Switchback II.
2. Landcadia Holdings II
Landcadia Holdings II (NASDAQ:LCA) is a SPAC owned and operated by billionaire Tilman Fertitta. Landcadia went public in May of 2019, raising more than $316 million. In June 2020, the SPAC announced that it had agreed to acquire and take public Golden Nugget Online Gaming, which would make it only the second U.S. online casino company to be publicly traded.
While it’s been volatile since June, Landcadia stock has jumped since the acquisition and recently traded around $23.26, up about 133% year to date. Landcadia has faced some legal issues, but in late November received regulatory approval from the New Jersey Casino Control Commission to acquire Golden Nugget Online Gaming. A special meeting will convene on Dec. 29 to get final approval on the transaction, but things are looking good.
3. Hennessy Capital Acquisition IV
Hennessy Capital Acquisition IV has a long track record of successful SPACs and is currently on its fourth one. Its first three involved acquiring companies in the transportation and waste management sectors. The company raised more than $300 million in its fourth SPAC in March 2019, selling units composed of a share and a warrant for $10 per unit.