Now That SPACs Have Fallen, Are Any Worth Picking Up?

April 14. 2022. 8 mins read

Mark Twain once said that it’s easier to fool people than to convince them that they’ve been fooled. Perhaps that’s because of loss aversion, a psychological concept where we feel the pain of losses twice as hard as the joy of winning. In the investment world, this translates into investors who refuse to acknowledge their thesis has gone sour. One way to avoid this dilemma is by only investing in firms that are showing strong revenue growth. When growth stops, something went wrong with your thesis.

When startups take venture rounds, they may not yet have demonstrated traction so the terms at which they can raise money aren’t favorable. Teams with dreams have little leverage at the negotiation table. But in later-stage rounds valuations can soar as investors ascribe a higher value to the possibility of future growth. Looking at these valuations can provide an indicator of intrinsic value. It’s something we discussed in our recent piece on Avoiding Value Traps in Beaten Down SPACs. Today, we’ll talk about trying to find value in beaten-down special purpose acquisition companies (SPACs).

Discounted SPACs

Thanks to the competent public relations team and research department over at PitchBook we were able to get our hands on pre-SPAC funding rounds for 45 of the 99 disruptive tech SPACs we’ve covered over the years (only one of which we invested in). Ten of these SPACs are currently trading at a discount to their last pre-SPAC funding rounds as seen below (companies’ names link to our past research).

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