I’ve been closely following the special purpose acquisition company revolution for over a year now, and one thing I see a lot of is celebrity-backed SPACs.
As many of you already know, SPACs have been one of the hottest sectors for investing the past year or so. And I’m seeing a lot of these athlete-, politician- and celebrity-backed SPACs, either as a sponsor or just lending their names to the projects so they can attract attention.
That’s a sign that things in the sector could be overheating… But that doesn’t mean there aren’t great buys out there to be had — there are. It just means you have to be a little more careful and shrewd when picking which ones you should invest in.
In my subscriber-only newsletter, I just recommended two SPACs. These are two that I have a great deal of confidence in. That’s because they’re backed by credible, experienced deal-makers who’ve been through countless boom-and-bust cycles in the economy and stock market itself.
And also because the companies they’re in the process of buying or have bought have a history of revenue, generating cash flow and often a history of generating profits.
So in that respect, you’re putting everything in your favor. Of course, it also helps if you’re buying the SPAC — or the post-IPO — as it goes off to become its own company at a reasonable price. That way you’re not paying $50, $80 or $100 for a stock that may not have any revenue or stature to make it all the way through a boom-and-bust cycle.
Celebrity-backed SPACs and the ability to become a SPAC sponsor are also becoming super popular — too popular in my opinion.
A good example is the Alex Rodriguez- and Jennifer Lopez-backed SPAC Hims & Hers. A-Rod is also introducing another SPAC to raise $500 million to buy into sports businesses and even franchises. Basketball Hall of Famer Shaquille O’Neal is backing yet another SPAC… Mandalay Entertainment CEO Peter Guber and singer Ciara are involved in another… and former Speaker of the House Paul Ryan has a SPAC… the list goes on and on.
And maybe those celebrity-backed SPACs will go on and do just fine. But a lot of what’s happening right now reminds me of the run up to the financial crisis of 2008.
Check out my short video and let’s dive into these celebrity-backed SPACs to see why some of them are so risky. Then leave your thoughts in the comments below.
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