What is a SPAC and how they work? (Stocks 101)

Wondering what a special purpose acquisition company or SPAC is? Have your friends been telling you to get into this hot new stock for 2021? Thinking of buying Tesla shares or Quantumscape stock?

In this video, I will explain what a SPAC is, how SPAC stocks work, what to look for in a SPAC stock option, and how you can invest in SPAC stocks in 2021.

Often people wonder whether SPAC stock options are a good investment or not. But before you can dive into what SPAC to buy, you must understand what SPAC means or stands for. SPAC is short for special purpose acquisition company. People in the industry like to call it a blank check company. The purpose of this company is to raise money from the public; this company has no operation at all, isn't a publicly traded company, BUT is a company that has a bunch of cash sitting within it. Then this business will acquire an existing business producing quite a bit of money or positive cash flow. This will then allow them to IPO or go public and start trading publicly without having to go through the direct process. The benefit is for private equity investors or private businesses that are able to go public in a quicker fashion and able to get traded a lot sooner. It also allows some of these businesses where traditional venture-capital might not make sense for them, but are you able to then access the public markets and able to raise capital from investors.

Some notable SPACs that have boomed throughout the year include Quantumscape which is an electric vehicle company that can charge a Tesla in 15 minutes. This is a lot faster than Tesla's supercharging today. But on that hype the stock has appreciated quite a bit.

I explain how the appreciation of Quantumscape and their collaboration with Volkswagen has contributed to the stock Bubble.

If you're looking to invest in stocks in 2021, how to learn about investing in stocks, specifically investing in SPACs and how to differentiate between a good investment or bad investment, you will find this video helpful!

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Video Host: Mithulan Perinpanayagam

Disclaimer: Mithulan Perinpanayagam is not a licensed financial advisor. He is a licensed CPA in Ontario, but is he is not providing you with accounting or tax advice in these videos. This video, the topics discussed, and ideas presented are Mithulan's opinions and presented for entertainment purposes only. The information presented should not be construed as financial or legal advice. Always do your own due diligence.