Equity investment firm Etalon Capital has launched the US SPAC Index. The index is constructed to provide investors with information and exposure to US-listed Special Purpose Acquisition Companies (SPACs) that have announced or completed an acquisition or merger transaction within the last three years.
Alex Gavrish, CEO of Etalon Capital
SPACs are “blank check/cheque” companies created in order to finance a merger or acquisition opportunity, usually within a set timeframe.
Alex Gavrish, CEO of Etalon Capital stated, “We have seen the SPAC market becoming more active lately. Although more risky and opaque, SPAC companies share many characteristics similar with spin-offs. It is a natural assumption that interesting investment opportunities could be found in this niche as well. The new index will give investors more information and add transparency to this market segment.”
The index tracks the performance of a representative portfolio of SPAC vehicles that have an enterprise value of at least $1 billion. Companies are expected to remain in the index for up to 36 months since addition.
Garvish further highlighted that, “merger or acquisition by a SPAC vehicle of an operating business represents an important corporate event. Similarly to a spin-off it becomes an important turning point in a company’s story. SPACs are a relatively small and opaque segment of the market and we hope that this index will provide more information on these events and highlight interesting investment opportunities.“
The index could form the basis of a potential SPAC-tracking ETF, a largely unexplored area for the ETF industry. Whilst there are a couple of successful IPO/spin-off-based ETFs (such as the $1bn AUM NYSE Arca-listed First Trust US Equity Opportunities ETF (FPX)) and a number of private equity ETFs, as yet no speciality SPAC play exists. Given that SPACs are typically absent from mainstream indices, investors looking to capture the performance of this dynamic part of the market may find a dedicated SPAC ETF appealing for the purposes of market completion.