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There’s a lot of negativity hanging around the special purpose acquisition company space these days. Investors aren’t impressed by the deals they’re striking or, indeed, anything about them. Gary Gensler certainly isn’t, either. And there are lots of good reasons for the sourness and skepticism even aside from the fact that their prices are plummeting and they deliver roughly 1% of the promised proceeds to their betrothed, from the last refuge of scoundrels nature of them to the late-night celebrity commercial style of some to the fact that they seem designed to enrich only the people who set them up and their lawyers and not the ones who invest in them or who decide to merge their companies with them to the apparently rampant fraud they not only seem to suffer from but to encourage by their very nature.

All of which may well be true, as far as Boaz Weinstein is concerned. The thing is, though, those criticisms miss the point, because SPACs are not in fact the blank-check equities they appear to be. They are, so sayeth the Saba Capital Management chief, mere bonds in disguise.

The money that SPACs raise is held in a trust and invested in Treasuries, funds that can ultimately get unlocked when the vehicle decides to buy a company. For example instead of backing the purchase, investors can often choose to get their money back at the initial offering price plus accumulated interest.

On top of that, SPACs are sold with warrants that can offer interesting returns, either if they are sold immediately or if the company gains value.

“SPACs are misunderstood because they’re fixed-income products,” Weinstein said.

Fixed-income products you have to run screaming from occasionally, but bonds all the same.

Saba’s Weinstein Recommends SPACs, CDS as Fed Tightens [Bloomberg]

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