Hoarding cash is the easiest way to lose money over time.

Cash yields virtually no interest and eliminates any opportunity to make real gains. Yet many investors hold cash with the intention of reducing risk.

What if I told you that you could use that cash to take virtually no risk and still have unlimited profit potential?

The good news is, you can.

The opportunity currently lies in special-purpose acquisition companies, or SPACs.

SPACs Can Set Investors Up for Huge Gains

SPACs are companies that operate by raising cash to merge primarily with high-growth companies.

Until a SPAC merges with another company, it keeps its cash in a trust account, and each SPAC share represents a pro rata share of the trust account.

Most SPACs are designed so that the trust account ownership is $10 per share.

For these SPACs, buying a share for $10 is like buying $10 of cash from the trust account. But unlike cash, holding SPAC shares can set investors up for huge gains.

DraftKings Inc. (Nasdaq: DKNG) and ChargePoint Holdings Inc. (NYSE: CHPT) are just a couple examples of SPAC success stories.

Early investors in the SPACs that merged with these companies would be up 482% and 142%, respectively.

DraftKings and ChargePoint SPACs graph(Source: Bloomberg.)

A Huge Buying Opportunity for SPACs

SPACs were all the craze in 2020, but they fell out of favor this year after a bubble quickly formed.

An influx of SPACs hit the market, and competition for deals began to heat up. Investors were paying a 500% premium to the cash value of certain SPAC shares. It was a complete mania.

The bubble eventually burst. And that has created a huge buying opportunity.

Several SPACs are now trading below their cash value. And in the event of a merger, SPACs provide shareholders with the opportunity to redeem shares for cash if they do not want to become a shareholder in the new company.

This means buying pre-merger SPACs below cash value is practically riskless. And if the market likes the merger that a SPAC agrees to, its shares can soar overnight.

Evaluating the best SPACs to buy is not an easy task, though. There are currently 578 premerger SPACs to choose from, and only some of them offer the potential for huge gains.

Investors that are interested in SPACs with a high reward-to-risk ratio can check out Ian King’s New Era Fortunes.


Steve Fernandez

Research Analyst, Strategic Fortunes