thevicenarian.com

Access to Wall Street Titans - Blank Check Companies

Posted by T.W. Hanson - Feb 17th, 2008 at 23:02

If you have heard of a special purpose acquisition company (SPAC), you need not read any farther. If not, it may be a good idea to look at one of the few segments of Wall Street doing well.

These SPACs are publicly traded companies with one purpose in life: acquire something. They raise money based on the strength of their management teams and the likelihood of finding an attractive target. Current SPAC management teams include Donald Drapkin, Nelson Peltz and Joseph Perella. You can type their names into google and find lists of deals and accomplishments.

The great thing about buying SPAC equity in a troubled market is that you get Treasury-like returns with a free option to take part in the deals of Wall Street’s most fabled individuals. The mechanisms in these instruments are somewhat complicated, but relevant to you is this option. When the SPAC announces its target and you as a shareholder are called to vote on the acquisition, you can either take part in the deal or take your portion of a trust account that has been accruing in value based on Treasury or Treasury-like securities. If high yield savings accounts and cd yields continue to plunge, these types of securities make more and more sense.

SPACs have purchased companies like Jamba Juice, American Apparel, Great Lakes Dredge and Dock, Navois Maritime, GLG Partners and others.

It should be noted that their historical returns have historically trailed the equity markets. The future is always uncertain and regulation of these companies is in flux. Make sure to always do your diligence, especially in these complicated types of structured securities and companies.

Enjoy the NYT’s take on these securities as well.