A new ETF will let investors participate in the stock market's $22 billion SPAC craze

Brendan McDermid/Reuters
  • Investors may soon be able to access the growing hype around SPAC offerings with the launch of a new exchange-traded fund.
  • The Defiance NextGen SPAC IPO ETF plans to be the first such instrument tracking the newly popular offerings, according to a Friday SEC filing.
  • More than $22.5 billion has been raised over 55 SPAC offerings in 2020 so far, according to SPACInsider.com. The fundraising sum has already eclipsed last year's total.
  • If the ETF comes to market, it will boast an 80% concentration in SPAC-derived IPO offerings. The rest of the ETF would invest in IPO companies themselves.
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Investors looking to hop on Wall Street's blank-check bandwagon may soon have a new option.

The surging popularity of special-purpose acquisition companies, or SPACs, has exchange-traded fund providers rushing to capitalize on the trend. The Defiance NextGen SPAC IPO ETF could be the first to do so. The instrument plans to track shares of companies taken public through SPAC mergers as opposed to traditional IPOs, according to a Friday filing with the Securities and Exchange Commission.

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The ETF would arrive on the market in the middle of a craze for such vehicles. The year has already seen 55 SPAC IPOs take place and collectively bring in more than $22.5 billion, according to SPACInsider.com. Just four more SPAC offerings took place throughout all of last year, and deals only raised a total of $13.6 billion.

SPACs exist to raise money for future acquisitions or mergers. The company raises capital in public markets and can take over a private company within two years. Investors can purchase shares of the acquisition vehicle before a takeover, and in some cases won't know the target acquisition at the time of investing. The Defiance ETF aims to create a diversified and passively managed SPAC portfolio, according to the SEC filing.

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Some of 2019's biggest SPAC IPOs include Virgin Galactic, DraftKings, and Nikola, all of which have seen their shares skyrocket in 2020. Billionaire hedge fund manager Bill Ackman added more fuel to the SPAC fire in late July when his own acquisition company — Pershing Square Tontine — raised a record $4 billion in its trading debut.

If brought to market, the ETF would be traded under the ticker SPAK. Four-fifths of the ETF's holdings will consist of IPOs derived from SPACs, while the final fifth will be allocated to IPO companies, according to the filing. Now read more markets coverage from Markets Insider and Business Insider:Advertisement

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