Abstract
Special Purpose Acquisition Companies (SPACs) have taken the initial public offering (IPO) market by storm. SPACs were 2/3 of all IPOs in 2021 and have continued to be a significant portion of IPOs since. A unique feature of SPACs is that the SPAC shares trade for weeks/months after a target has been announced, but before the proposed deal is consummated, giving a window into the market's sentiment towards the deal terms. Although Shareholders' redemption option reduces the informativeness of SPAC shares, SPAC rights (& warrants) provide a window into the eventual pricing of SPAC shares post de-SPAC because they aren't redeemable. We explore the informativeness of the portfolio of SPAC securities and find new insight into the pricing of these transactions. Prices of rights and warrants are far more informative about the value of a proposed business combination than share prices, and warrant prices are predictive of future redemptions.
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