Premarket Stocks: Market mania has fueled a SPAC boom. Here are those who are at risk

Sign of the times: Among the most prominent indicators of market mania has been the explosion of special purpose acquisition companies, or SPACs. Companies called “blank checks,” which allow investors to support sponsors who then seek to make a private entity public, have raised tens of billions of dollars in 2021, an increase of more than 2,000% from 2020.

More and more people are sounding the alarm. U.S. regulators have warned that investors should not support SPACs just because there are celebrities linked. Meanwhile, short sellers ’interest in SPACs has risen, according to data from S3 Partners, which indicates that a growing number of traders believe the excitement is excessive and that stock prices are destined to fall.

Step back: if the SPAC frenzy has gotten out of hand, who pays the price? Experts warn that not everyone will emerge victorious, and that some retail investors embroiled in madness could hurt themselves.

“The time to get money fast seems to be long gone,” Atwater said.

One concern is that there is simply too much SPAC money pursuing a limited number of solid acquisition goals. This could force homeowners to consider acquiring less mature companies that may not meet high growth expectations or hire less profitable deals.

“Every day a large number of SPACs are created,” Will Braeutigam, partner and leader of SPAC at Deloitte, told me. “With so many SPAC sponsors bidding for the same companies, the positive value you think there may be may not be there.”

Guillermo Baygual, co-director of mergers and acquisitions for Europe, Middle East and Africa at JPMorgan Chase, notes that not all SPACs are created equal. He believes that this corner of the market “will become a more professional asset class over time,” as investors distinguish between companies with a proven track record and those created just to seize the moment.

Meanwhile, everyday investors who have not been discerning could keep the bag, according to Atwater. He noted a rush to buy shares of SPAC before the acquisition targets were even announced.

“It would be thought that investors would wait to see what [they] buy, ”Atwater said.

If a target is not identified, initial investors will regain their standard of $ 10 per share, Atwater explained. But eager investors who want to get ahead of an agreement and pay $ 20, $ 30 or $ 40 per share in the open market make purely speculative bets.

Some SPACs will end up being success stories. But Baygual warned that not everyone was a safe bet. “Investors should make their investment decisions on the fundamentals,” he said.

Investors rejoice as Intel unveils the investment plan

The latest: Intel has unveiled several major initiatives, including a $ 20 billion investment in two new chip-making facilities in the United States.

The moves mark the company’s attempt to reaffirm its position as the undisputed leader in the semiconductor industry after several tough years, according to my CNN business partner Clare Duffy.

“We are setting a course for a new era of innovation and product leadership at Intel,” Gelsinger said in a statement.

Remember: Gelsinger took over a company facing many challenges, including Apple’s unprecedented competition and an activist shareholder demanding a change. Intel has also experienced major delays in next-generation chip production, which has allowed TSMC and Samsung to move forward.

Over the past two years, Intel shares have risen just over 19%, compared to growth of almost 114% in the PHLX Semiconductor Index which tracks the broader sector.

Looking to the future: The new strategy could help solve many of these problems. Intel, which is working to perfect its new next-generation 7-nanometer chip, plans to review its manufacturing process and rely more on outsourcing. At the same time, it will put more money on its Arizona campus, creating thousands of jobs.

Investor Information: Intel shares rose nearly 4% in premarket trading, while competing AMD shares are lower. Shares of TSMC, the world’s largest contract chip maker, fell 3% in Taipei on Wednesday.

GameStop shares falls after disappointing results

GameStop shares have risen this year thanks to enthusiasm on social media, as novice retailers bet that the troubled video game retailer could produce a lucrative switch to digital that would increase sales.

Signs of change: Global e-commerce sales rose 175%, accounting for 34% of the company’s total net revenue during the quarter. Over the same period last year, e-commerce accounted for only 12% of total sales.

“Our focus in 2021 will be to improve our e-commerce and customer experience, increase our delivery speed, deliver superior customer service and expand our catalog,” CEO George Sherman said in a statement.

But will it be enough to keep investors interested? The company’s shares initially jumped more than 5% in out-of-hours trading, but fell 14% for the last time. It closed at $ 181.75 on Tuesday, down 9% from the start of the week, but up nearly 865% year-on-year.

Until next time

General Mills reports results before U.S. markets open.

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