PSPCs are Goldman Sachs’ New Bonds, 30 High Yield Choices

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  • 93% of active SPACs are now trading below par, according to a research note from Goldman Sachs.
  • Given that they are so cheap, PSPCs offer a solid alternative to bonds, with a low risk hold until redemption strategy.
  • Insider lists Goldman Sachs Top 30 SPAC Picks that offer high annualized returns.
  • See more stories on the Insider business page.

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After-sales service
The bubble is starting to burst, as predicted by many legendary investors, like Jeremy Grantham.

About 93% of active SPACs are trading below par, according to a new research note released by Goldman Sachs on September 15. It shouldn’t be.

As a reminder, the SPACs, ad hoc acquisition companies, are formed by a group of investors with solid experience in a particular field. Together, these blank check companies raise funds from other investors to buy out an existing private company with the goal of going public. People invest based on the reputation of the management team and pay $ 10 per share to join.

SPAC sponsors have a limited time to find a target business – typically two years. The money is placed in an interest-earning trust, typically short-term U.S. Treasuries, and can only be used to acquire a business or reimburse shareholders if time is of the essence and no takeovers are in place. takes place.

If an investor does not like the selected target company, he can opt out at the time of redemption and get his share of the trust back.

In theory, black check companies shouldn’t trade too much below $ 10, otherwise investors will simply be rewarded for providing money until the payback period. Still, 93% of the 398 active PSPCs are trading below par, according to Goldman data.

This is in part due to the SPAC madness that ensued in late 2020 and early this year. Each week in the first quarter of the year, an average of 21 PSPCs raising $ 6 billion in capital hit the market, analysts said.

But as yields started to fall, so did investor interest. An example of this is evident in exchange traded funds that focus on SPACs.

Morgan Creek Capital’s Exos SPAC Originated (SPXZ) ETF is down 16% year-to-date compared to the S&P 500’s 21% gain. ETF’s assets under management also fell 59% from $ 47 million in March to $ 19 million today.

Likewise, Defiance’s SPAC ETF, SPAK, is also down 20%. On the flip side, the actively managed SPAC (SPCX) exchange-traded fund by Matthew Tuttle has returned 12% to investors since the start of the year. Its fund focuses solely on pre-merger after-sales services.

The poor returns scared off investors, causing stocks to fall irrational. This is an opportunity for investors, according to analysts at Goldman Sachs.

They found that a median SPAC currently seeking a target offers investors a return of 2.7% if they were to hold until redemption.

“In a world where 10-year Treasuries return 1.3% and junk bonds 2.8%, some PSPCs offer attractive, low-risk redemption yields,” said David Kostin, equity analyst at Goldman Sachs.

PSPC Yields Chart Against Goldman Sachs September 15th Note Expiration

PSPC Yields Chart Against Goldman Sachs September 15th Note Expiration

Goldman Sachs


We break down the list of analysts from the 30 PSPCs with the highest annualized redemption return value.

PSPC’s choice

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