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This will be the year of the SPAC.
Many more companies than I had ever expected went public last year in what was a very difficult year for deal makers.
But this didn't happen because of the traditional IPO process.
SPACs, or special purpose acquisition companies, made that possible. These are publicly traded shell companies created with the sole purpose of merging with a privately held businesses to bring it to public markets. This not only provided an easier path for private companies to go public but gave investors the opportunity to invest earlier on with innovative companies.
As we look ahead to 2021, this trend isn't going to slow down at all. Not only are we seeing more of these companies form every week, but many of the SPACs that went public in 2020 will be buying private companies this year. That's giving all of us the opportunity to invest earlier on, just like venture capital firms.
But not all SPACs are worth buying. With over 200 blank-check companies reaching public markets in 2020, it pays to be selective. Some SPAC mergers have been big let-downs for investors. But the most successful SPACs have had one thing in common: excellent management.
As a technology investor, I have been watching many of these companies form, and I've been digging into the management behind each and every one of them to share with you what is on the horizon.
There are the three best SPACs to watch right now...
3 Top SPACs for Tech Investors
Altimeter Growth Corp. (NASDAQ: AGC)
This SPAC is being run by one of the top tech investors of the decade, Brad Gerstner, the Founder of Altimeter. Not only has he invested in companies like Facebook Inc. (NASDAQ: FB), AirBnb Inc. (NASDAQ: ABNB), Uber Technologies Inc. (NYSE: UBER), and Unity Software Inc. (NYSE: U), but he was an early investor in Snowflake Inc. (NYSE: SNOW) back in 2015 and came out with an $8 billion profit as it went public.
We know this guy can pick successful tech firms, and that is why I am excited about Altimeter Growth Corp.
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He has also put together a very strong board including Richard Barton, the co-founder and CEO of Zillow Group Inc. (NASDAQ: Z), Aishetu Dozie, founder and CEO of Bossy Cosmetics, and Dev Ittycheria, CEO of database company MongoDB Inc. (NASDAQ: MDB) and Director at Datadog Inc. (NASDAQ: DDOG).
Altimeter raised $450 million by offering 45 million units at $10, giving it plenty of cash to find a suitable target. Its objective is to identify, acquire, and operate a business in a secular-growth area of the technology sector that will compound growth over the long term for exponential value creation.
AJAX I (NYSE: AJAX)
There is an all-star team of executives behind this SPAC that went public in 2020. The team includes Steve Ellis, the founder of Chipotle, Jim McKelvey, the co-founder of Square, Kevin Systrom, co-founder of Instagram, and Anne Wojicki, co-founder of 23andMe.
Not only does this SPAC have an all-star cast of founders and CEOs, but it will also be run by billionaire investor Daniel Och, who founded hedge fund Och-Ziff Capital and Glenn Fuhrman of MSD Capital. These guys have plenty of experience in private markets as well as investing in technology companies like Coinbase, Instacart, Stripe and Robinhood, which all have multibillion-dollar valuations with plans to go public.
With the SPAC looking to find a company that operates in the Internet, software, financial technology, or consumer industries, I am excited to see what it might acquire.
Reinvent Technology Partners (NYSE: RTP)
Gaming has been an incredibly hot sector this year, and that is why I'm looking at Reinvent Technology Partners. The company is co-lead by Mark Pincus, the founder and Chair of Zynga Inc. (NASDAQ: ZNGA), and Reid Hoffman, co-founder of LinkedIn and Partner at venture firm Greylock. Outside of the founders, there are also very smart names on the team including Daniel Urdaneta from ValueAct Capital, an investment firm that managed $16 billion in assets and Dena Cook, former EVP at Mattel (NASDAQ: MAT).
The company plans to target a business in tech with a focus on consumer Internet, online marketplaces, e-commerce, payments, gaming, artificial intelligence, SaaS, digital healthcare, autonomous vehicles, and transportation.
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About the Author
Alex Kagin is the Director of Technology Investing Research at Money Map Press. He has spent the last decade working in equity research, most recently with Energy Capital Research Group (ECRG), where he led technology stock research along with working as part of a team developing a customizable financial data platform for securities analysis.
Prior to joining ECRG, Alex spent 8 years at DeMatteo Research, a boutique primary research firm and broker-dealer servicing the institutional investment community. He managed the Tech, Media, and Telecom vertical where he spent time connecting with hundreds of tech executives and hedge funds to get the pulse of the market.
Alex has a B.S. in Economics from American University and previously held Series 7 and 63 security licenses.