SPAC Frenzy
By Mon, Aug 24, 2020
Hey Scoopers,
The manufacturing and housing sectors are pushing forward in full force to keep up with demand, and the market celebrated it by wrapping last week in the green. — More on that in the “Overall Market” section.
Beyond the overall market, a stock split continues to rally investors, while a 67% jump in revenue disappointed them. — More on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, the SPAC frenzy has reached Oaktree and Howard Marks. — More on that in the “Water Cooler” section.
But, first, here is a recap of what happened in the market yesterday:
Market Recap
- U.S. markets: All three indices wrapped last week in the green. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: Bitcoin’s price stayed under the $12,000 mark, and analysts have turned pessimistic.
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Manufacturing And Housing In Full Force
The stock market’s 5-day return ranged between stable for the Dow to approximately 3% for the Nasdaq. The S&P500 hovered somewhere in between. The upbeat market trend towards the end of the week was courtesy of a new record in the U.S. manufacturing survey by IHS Markit showing businesses pushing forward to keep up with consumer demand. The rapid growth in the existing home sales didn’t hurt the market’s vibe either.
Makes No Sense
So, what happened?
Shares of Apple (Ticker: AAPL) were up more than 5% on Friday. A $2 trillion company growing 5% in value in one day results in a bigger market movement than the combined value of thousands of already publicly-traded companies. It’s almost difficult to comprehend that the only reason behind the recent jump is a stock split that makes the stock more “affordable” to small investors. We know you have heard this so often, but this recent market movement doesn’t make any sense!
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A 67% Jump Disappointment
So, what happened?
Shares of Pinduoduo (Ticker: PDD) were down by more than 13% on Friday. The company is the leader in social e-commerce in China and announced its quarterly earnings report on Friday. Sales were up by 67% but the growth was below expectations. Despite that disappointment (if you can call a 67% jump a disappointment), the gross merchandise volumes jumped 79%, and average monthly active users rose by 55%. This is still a strong company with a solid performance that just didn’t make it to the heightened expectations.
The SPAC Frenzy
So what happened?
Billionaires and major funds can’t help themselves but get into the Special Purpose Acquisition Company (SPAC) game. It started with Bill Ackman and Pershing Square, and now Oaktree and it’s Oaktree SPACs (Ticker: OAK) that is creating all the buzz. So, uncle Howard Marks is getting into the SPAC game too. Although, he doesn’t seem to be personally involved, unlike Bill Ackman.
The company is reportedly planning to merge with Hims, a telehealth company that offers personal health and wellness products for men, mostly. You may have seen its minimalist ads on TV.
We call SPACs a frenzy because there is not much factual information about these companies to report beyond an utter trust in the SPAC’s management, who will run the show. While investors position investing in SPACs as a once-in-a-lifetime opportunity to earn startup-like returns, investing in them is betting in its latest form. What a frenzy!
Have you invested in any recent SPAC IPOs? Which one? Our email address is members@tradestocks.com. Let us know!
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
