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You grossly misunderstand SPACs if you think they shoot up at least 4x on announcement & hype.

This is a very rare phenomenon, and even with the most prominent SPAC sponsor (Chamath), of his current 4 SPAC deals that are post-DA, only 1 has exemplified what you characterize (Virgin Galactic's $55 ATH). The others have never broke $40 or above. This includes every SPAC he has been in the PIPE (5) with exception of 1 (NYSE: MP) which has broke $40.

Therefore, of the 9 post-DA SPACs that have had some form of association with the one of the most popular SPAC sponsors (Chamath), only 2 exemplify what you describe.

However, I do agree with the general premise of your comment. SPACs without founder and PIPE lockups are most likely destined to perform poor in the long term.

Is this a big scam? Considering the fact that most of the 130~ SPACs that have a DA do not fit into your characterization (most do not shoot up even 2x after LOI/DA announcement & hype, most sponsors have not cashed out - whether that be peak or not, most do not trade at $15 but rather way closer to NAV), I would be inclined to say they are not scams in that regard. I would say they are unfair rather than scams (most SPACs have a high % of founder shares, no lockup etc).

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jb775|4 years ago

Ok maybe I should have said my description is the ideal scenario in the eyes of SPAC creators. Obviously not every one will have a 4x price surge, and not every one will completely tank. There's a reason why they try to attach celebrities or well known businesspeople...purely to build hype. If you (and the creators of the SPACs) agree they're destined for poor performance, how is it not a big scam?

It's kind of like around the time of the Dutch East India Company when tons of bogus companies popped up and publicly sold shares that completely tanked shortly after (e.g. a company claiming it invented a perpetual motion wheel machine, etc).

I'm referencing tickers such as APPH, NKLA, HYLN, THCB, LACQ. I'd wager a bet that most of the early investors for these examples are already cashed out at a significant profit knowing they would tank shortly after they did.