[ethanolburner]

I would break SPACs currently in the market down into 2 categories; pre-DA and post-DA.

In other words, there are a number of SPACs which have already posted their target company, their financials, future projections, as well as other things like PIPE investors, % SPAC ownership etc. Most of these, due to the current climate, are trading at or slightly above NAV, therefore, they are akin to buying stock in any other company with a small downside if the deal does not materalise [1].

What you would be referring to in your example are pre-DA SPACs, in which you are correct as it relies on the sponsors prior performance and praying they will find a good target at an appetizing valuation. However, even here there is a small downside, since of the 430 SPACs searching for a target [1], the majority are trading at or below NAV with very few breaking this rule, which is why it is so lucrative for investors and arbitrage HFs.

For instance, if you do proper due diligence on a particular SPAC sponsor and have mild conviction on their ability to obtain a good target, chances are their SPAC is trading at or below NAV, therefore, it opens an opportunity to invest in something near risk-free. If a deal does not materalize, then you get $10 (or NAV) back, and if it is a good target you reap relatively good rewards. If it is a bad deal or you do not like the company, you have the ability to sell at or near the same price you bought (provided it was close to NAV), since very rarely in the window of post-DA to de-SPAC will the SPAC price fall below NAV. The only significant downside is opportunity cost since the core idea revolves around parking money and not utilizing until the sponsor announces a deal, and other investments even in index funds may have provided higher returns in that timeframe, which could be a good or a bad thing, especially in volatile markets.

[1] - https://spactrack.net/activespacs/