Last Call to Profit from the SPAC Boom Turned Bust?

You're receiving this email as part of your subscription to Lou Basenese’s Trend Trader Daily [Unsubscribe](. [Trend Trader Daily] Last Call to Profit from the SPAC Boom Turned Bust? Tuesday, September 6, 2022 [Last week](, I put you on high alert about the implosion potential for social media stocks. I pegged Digital World Acquisition Corp. (DWAC), a special purpose acquisition company (SPAC), as the riskiest of them all. And right on cue, shares are trading down as much as 21% today. In a moment, I’ll share more about why DWAC is tanking… and the reason I believe the stock is doomed to fall another 50% from here. But first, I want to highlight the spectacular bust underway in the SPAC space, as it drives home the unique but dwindling opportunity we have to bet against DWAC. So let’s get to it… > ADVERTISEMENT < Shocking Instant Money "Cheat Code" Put to the Test LIVE on Camera... How does a no-name software engineer become a "viral" internet trading sensation? That's what we sat down to ask Keith Kaplan. A Maryland father of two... and a former software coder for Fortune 500 companies... Kaplan uncovered an instant-money "cheat code" in the stock market he believes could add up to $2,880 in extra cash to your monthly income. According to Kaplan, it all comes down to focusing on [this overlooked "corner" of the market.]( SPAC 101 For those unaware, SPACs are shell companies that raise money from investors with the sole purpose of using that money to merge with a private company to take it public. As such, investors are blindly investing in the hopes that the SPAC sponsors can find an attractive acquisition candidate within the allotted time (typically, two years). If they don’t find a deal, the SPAC must return the money to investors. Even if they do find a compelling deal, there’s no guarantee that the investment will be a winner. As always with investing, the outcome becomes a function of the price paid and each business’ underlying fundamentals over time. If you’re wondering why I’m bothering to write about SPACs, it’s simple — SPACs became all the rage in recent years. Case in point: We went from 59 SPACs in 2019 to 248 in 2020 to a whopping 613 in 2021. This year? There have only been 70 SPACs. And there were zero in July. So it’s no exaggeration when I say the SPAC boom has turned into an epic bust. Of course, I warned you as far back as [October 2020]( that this boom would end badly, too. Why? Because investing fads always do. More specifically, I shared historical stats on how the overwhelming majority (70%) of SPACs failed to ever identify a private company to buy, which resulted in negative returns (-10% average return, -30% median return). That’s why I singled out the ETF formed solely to profit from SPACs – the Defiance Next Gen SPAC Derived ETF (SPAK) – as a compelling short. Sure enough, things went so bad, the fund’s adviser decided to throw in the towel completely in August, when they closed and immediately liquidated the ETF. For investors in the ETF that bought at the peak, they had no choice but to realize a 60%+ loss. But I assure you this won’t be the last SPAC bust. A Simple Two-Step Screening Process Thanks to the efficiency of the internet – and sites like [SPAC Track]( – we can now quickly screen for the most vulnerable deals. By that I mean SPACs with 1) high valuations and 2) little remaining time to find or finalize an acquisition. If we focus on SPACs still searching for a deal with a deadline approaching, we get a manageable list of 49 SPACs. I checked the valuations on each, and all of them are currently trading at or very close to the deal price of $10 per share. So there’s no obvious shorts. That said, this is a good list to monitor for sudden and massive spikes on deal announcements. They’ll most likely fail to close, which will bring shares back down to earth. In a hurry. Now, if we focus on SPACs with signed agreements that are approaching the deadline to close, we get a list of 29 SPACs. Among those SPACs, of course, is DWAC. I ran through the same exercise of checking the valuations of each. And it turns out that DWAC is the only one that’s trading at a significant premium to the $10 per share offering price. In other words, it’s an obvious and screaming short. Even after today’s double-digit sell-off, which was prompted by a failure to secure shareholder support to extend the deadline to close on the deal by one year, per [Reuters](. How much further could shares fall and when? Regarding the latter, there are a few short-term fixes possible to buy up to six month’s more time. But all the risks threatening the deal (like the SEC investigations) most likely can’t be resolved within that time. Add it all up, and it’s not a matter of if the deal will definitely and irreversibly fall apart… it’s just a matter of when. In such a scenario, DWAC will promptly fall to about $10 per share, or about 50% from current prices. That’s too compelling of a profit opportunity to pass up in this market. So don’t pass it up!   FOR TREND TRADER PRO READERS ONLY > [LEARN MORE]( < Ahead of the tape, Lou Basenese Founder & Chief Investment Strategist   Copyright © Trend Trader Daily, All rights reserved. You signed up on []( Our mailing address is: Trend Trader Daily 301 S. Perimeter Park Dr. Suite 100 Nashville, Tennessee 37211 [Update Subscription Preferences]( | [Unsubscribe from this list]( RISK NOTICE: All investing comes with risk. That includes the investments teased in this letter. You should never invest more than you can afford to lose. Please use this research for the purpose that it's intended — as research only. 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