Amrith Ramkumar
speaker
860 appearances
16 recordings
1 series
first heard May 2018
last heard Sep 2021
Amrith Ramkumar’s voice in public audio — every appearance, attributed to the second.
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Appearances
But now we're seeing withdrawal spike with share prices of SPACs falling and day traders see the excitement as a chance to make a quick buck.
It's really tough to say.
I think some people making these bets know the risks and are willing to take them.
And that's what some professionals and analysts call a bit scary.
But yeah, you're right.
There are a lot of complicated factors at play here.
So historically, again,
High investor withdrawals mean that the company going public through the SPAC has much less cash from its deal than it could have otherwise.
So if the SPAC has $300 million and you raise a private investment round in public equity that goes along with the SPAC deal of $200 million, you're expected to have $500 million from your SPAC deal to fund your growth.
And that's a good chunk of money.
That's why a lot of companies have gone public through SPACs, because you can generate several hundred million dollars
very quickly.
But if the SPAC investors pull out their money, that $300 million turns into maybe $50 million, then all of a sudden, you have much less money than investors thought you might.
And historically, again, that's been a bearish signal.
It's a sign that a lot of other investors don't want to hold shares in this company, and it would push down the stock, or trading would just be a
Day traders, again, either know that and don't care, or they're just piling in and hoping the excitement creates fast gains.
So the risk, again, is if you're buying shares in a company that's risen by four times in just a few weeks after suffering high withdrawals and having much less cash than people thought it would.
I mean, that's a very risky wager when you don't know much about, again, the company that's going public.
It just turned public.
So those are some of the risks involved that people have to be very careful about.
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