3 SPACs That Have Held up Relatively Well Through the SPAC Correction

Special purpose acquisition companies (SPACs) have undergone a brutal correction over the past couple of months as investors shun speculative growth stocks. At the same time, there have been concerns around lofty valuations while regulators are starting to scrutinize SPACs more closely for fear that average investors will get burned. 

Not long ago, many SPACs were trading at significant premiums even before announcing a merger with a target company to take public. Some high-profile SPACs were trading at 40% to 50% premiums to the $10 net asset value (NAV), and many have pulled back to approach $10. The NAV effectively serves as a floor for a SPAC that has not yet closed its merger, as shareholders can always redeem their shares for NAV.

Here are 3 SPACs that have targets and have stayed meaningfully above NAV during the SPAC downturn.

Churchill Capital Corp IV: Lucid Motors

One of the hottest SPACs is Churchill Capital IV (NYSE: CCIV), which is merging with nascent electric vehicle (EV) maker Lucid Motors. While the stock has sold off significantly from the speculative highs of around $65, Churchill Capital IV has remained well above NAV compared to some other SPACs.

It’s worth noting that Churchill Capital IV’s situation is a bit unique. Due to the run up that was driven by rumors around the Lucid deal, the SPAC was able to get PIPE (private investment in public equity) investors to buy in at $15 instead of the typical $10. While the shares still technically carry the $10 NAV, the fact that institutional heavyweights were willing to commit at $15 could provide additional support around those levels.

The recent low has been $17.62.

ArcLight Clean Transition: Proterra

Another EV SPAC is ArcLight Clean Transition (NASDAQ: ACTC), which is taking electric bus leader Proterra public in a deal that gives the company an enterprise value of $1.6 billion. Proterra is the No. 1 provider of electric buses in North America, and many cities and municipal governments are expected to continue pushing forward in electrifying public transportation.

President Biden has announced plans to support EV adoption in numerous ways, and he recently virtually toured a Proterra manufacturing facility earlier this week to learn more about the technology. The President’s infrastructure plan will include billions of dollars for electric school buses. Proterra has been scoring numerous deals to provide electric school buses to various districts, including the largest deal to date in the United States for a county in Maryland.

ArcLight Clean Transition hit a low of $13.85 in early March.

Social Capital Hedosophia Holdings Corp V: SoFi

Announced in January, Chamath Palihapitiya’s Social Capital Hedosophia V (NYSE: IPOE) is preparing to merge with fintech startup Social Finance, also known as SoFi. Following a sexual harassment scandal a few years back, SoFi ousted founder and former CEO Mike Cagney and tapped former Goldman Sachs (NYSE: GS) banker and Twitter (NYSE: TWTR) COO Anthony Noto to lead the company.

Since then, Noto has reformed the company’s internal culture while aggressively expanding into more financial products and services such as investing, cryptos, and insurance. SoFi now has nearly 1.9 million unique members, and member growth has been accelerating in recent quarters as brand awareness grows.

The stock’s recent low was $13.14.

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Evan Niu, CFA owns shares of ArcLight Clean Transition Corp., Churchill Capital Corp IV, and Social Capital Hedosophia Holdings Corp. V and has the following options: long January 2023 $15 calls on Churchill Capital Corp IV and long January 2023 $20 calls on Churchill Capital Corp IV. The Motley Fool owns shares of and recommends Social Capital Hedosophia Holdings Corp. V. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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