2020 is a year that will be remembered for many things, but investors and traders might fondly think of it as the “year of the SPAC”. SPACs, or Special Purpose Acquisition Companies, have been popping up left and right thanks to the massive influx of speculative money in the market and prominent figures like Paul Ryan and Bill Ackman putting together deals. Also referred to as black-check companies, SPACs are enabling private companies to quickly start trading publicly without having to deal with some of the downsides of the traditional IPO process.
If you aren’t familiar with SPACs, deal-makers will raise money based on their expertise and then target a specific area that they want to invest in. Once the SPAC has been funded, the deal-maker will look for acquisition targets and move forward with a reverse merger. With a flurry of SPACs hitting the market seemingly every other week, many investors are excited about the new options that are being presented to them. 3 SPAC stocks in particular that look very intriguing ahead of 2021. Keep reading to learn about these unique investment opportunities and why they are worth watching into the new year.
1. Opendoor
First on our list is Opendoor, which until recently has traded under the name Social Capital Hedosophia Holdings II (NYSE:IPOB). This special purpose acquisition company recently announced that it has completed its reverse merger to take Opendoor public and that the company is expected to begin trading under its new ticker symbol OPEN on December 21. While the SPAC stock has been on quite the run this month and is up over 54%, investors should be more interested in the new company that is being formed and how it will trade going forward.
Opendoor is a company that is reinventing how people buy and sell their homes. It provides people interested in buying and selling properties an easy-to-use online marketplace. We know how large the real estate market in the U.S. is since over 68% of Americans are homeowners and there are 5 million homes sold annually in our country. That means there is a huge addressable market for this company. The merger transaction values Opendoor at $4.8 billion, making this one of the best SPACs for investors to watch heading into 2021.
2. Insu Acquisition Corp II
Next on our list is Insu Acquisition Corp II, a SPAC that is backed by both Mark Cuban and Social Capital Investor Chamath Palihapitiya. While the reverse merger for this one probably will take some time to go through, it looks like investors are already accumulating shares. If you have some patience and are interested in what could be a very successful investment next year, this is a SPAC to watch.
The company that will be acquired by INAQ is Metromile, a digital auto insurance company with an intriguing business model. The company is aiming to disrupt the auto insurance market by offering a low priced fixed-rate base insurance plan that also charges on extra miles driven. The company states that roughly two-thirds of drivers in the U.S. are considered low mileage drivers and are overpaying for their auto insurance. It’s interesting to think about a company that allows you to pay for insurance by the mile, and Metromile is a company that will likely use the funds from the merger to accelerate its growth after the reverse merger has been completed.
3. Pershing Square Tontine Holdings
Typically, investors should avoid investing in SPACs until after a merger is officially announced, but that’s not the case with Pershing Square Tontine Holdings. This SPAC is unique as it was the largest SPAC IPO to date and is backed by legendary hedge fund manager Bill Ackman. An investment in this SPAC is essentially an investment in Bill Ackman and his team, which might turn out to be a smart decision. According to the latest 10-Q submission, the company has over $4 billion in cash and marketable securities that could be used to acquire a company in the coming months.
Money is already flowing into this SPAC even though it hasn’t closed on a merger with a private company yet, as the stock is up over 12% since it began trading publicly. The bottom line here is that Pershing Square Tontine Holdings is one of the most intriguing SPACs for investors to keep an eye on heading into 2021.