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In Canada, there have been four SPAC listings so far this year, worth $618-million, according to a report by CPE Analytics.Nathan Denette/The Canadian Press

Investing in companies that don’t disclose where the money is going may not sound like a good idea, but it’s a bet more investors are taking with the rise of special purpose acquisition companies, or SPACs.

SPACs are often referred to as “blank-cheque companies” with a goal of finding promising, yet highly speculative private firms to merge with and take public.

While SPACs first emerged in the 2000s, their “recent popularity arose out of the demand to access new, developing companies especially during the pandemic,” says Lois Gregson, a senior ETF analyst at FactSet Insight in St. Louis.

An alternative to an initial public offering (IPO), SPACs are generally a less expensive way for promising private enterprises – particularly those developing new technologies – to list.

The SPAC process also doesn’t require the typical fundraising road shows that IPOs do, which became challenging amid COVID-19, she adds.

In turn, many SPACs have been listed in the last year. According to, there were 248 SPACs listings in the U.S. last year, raising more than US$83-billion. So far this year, more than 366 have listed, accumulating more than US$112-billion.

In Canada, the market is much smaller, with three SPACs listing in 2020, raising $687-million, and four listings so far this year worth $618-million, according to a report by CPE Analytics.

In response, a crop of exchange-traded funds (ETFs) has also popped up, providing diversified exposure to SPACs. Here are six to consider, by asset size, including one in Canada:

SPAC and New Issue ETF (SPCX-A)

SPCX is the largest in the SPAC ETF space, with US$108-million in assets, and is the third ETF to list in this space, launched in December by Tuttle Tactical Management LLC. It’s the first actively managed offering of its kind, with a higher fee to match of 0.95 per cent.

The ETF, which has 118 holdings, only invests in pre-deal SPACs.

“SPCX is going to be much less volatile because before a deal is done, SPACs are essentially a pot of cash in search of a merger,” says analyst Sumit Roy.

Typically, pre-deal SPACs trade near listing unit price of $10 (an industry standard), which generally rises and falls slightly depending on investors’ view of proposed mergers.

Mark Yamada, chief executive officer of PUR Investments Inc. in Toronto, says it’s a less risky approach by concentrating on pre-merger SPACs and selling them after a merger is announced, while retaining their warrants (which unitholders receive alongside a common share in the newly formed company).

He cites research showing SPAC shares drop by one-third within a year after a merger. By holding onto the warrants, he says the ETF provides investors with upside if mergers result in strong share price performance as the warrants afford the opportunity to buy new companies’ stock at a modest premium over issue price.

“That’s the sweet spot in this game,” Mr. Yamada says.

One drawback is its limited upside as the ETF misses out on the full growth potential of post-merger SPACs that do well, adds Mr. Roy.

Another risk is “you don’t know what companies these SPACs will end up merging with,” he adds.

The ETF is up about 13 per cent so far this year, as of market close on July 9. (Data from Morningstar.)

Defiance Next Gen SPAC Derived ETF (SPAK-A)

Launched early last fall, the Defiance product is the second-oldest SPAC ETF on the market. It’s also the second-largest SPAC ETF by assets size, at about US$60-million, as well as the cheapest, with a management fee of 0.45 per cent.

SPAK straddles two sides of the sector, Mr. Roy notes: 60 per cent are investments “you know,” or SPACs that have merged with companies, while the other 40 per cent “is a gamble,” or SPACs still looking for merger opportunities.

SPAK tracks the Indxx SPAC & NextGen IPO Index, a passive rules-based index of newly listed SPACs (ex-warrant) and SPACs that have merged with companies. It has about 300 holdings, including DraftKings Inc., a fantasy sports pool operator, and Virgin Galactic Holdings Inc, a commercial space flight company.

The ETF is down about 12 per cent year-to-date.

Accelerate Arbitrage Fund (ARB-T)

ARB, managed by Calgary asset manager Acceleration Financial Technologies, is the only Canadian-listed SPAC ETF, notes Daniel Straus, director of ETFs and financial products research at National Bank of Canada Financial Markets. Launched in April, 2020, it’s the first SPAC ETF to launch in North America.

“Like SPCX in the U.S., it is a ‘pure-play’ SPAC fund” and actively managed with a 0.95 per cent management fee, he adds. Its total assets are about $39-million.

Also similar to SPCX, ARB invests in pre-merger SPACs, but uses hedge fund strategies such as arbitrage to buy units in SPACs at or below net asset value (NAV) to generate a return, for example, by exiting a position at a premium to NAV after a SPAC announces a merger.

ARB is up 6 per cent year-to-date.

Morgan Creek-Exos SPAC Originated ETF (SPXZ-A)

Launched in January, SPXZ is another actively managed SPAC ETF, with a management fee of 1 per cent. It allocates one-third of the portfolio to pre-merger SPACS and the remainder to post-merger, notes Ms. Gregson of FactSet.

Some of its 104 holdings include Virgin Galactic, PureCycle Technologies Inc., which is developing a new technology to recycle plastic waste, and ChargePoint Inc, an electric vehicle infrastructure company.

Besides being highly speculative, Ms. Gregson adds SPXZ’s is relatively small with US$25-million in assets.

SPXZ is down about 20 per cent since its launch on Jan. 26.


DSPC is one of the newest entrants, launched on May 19, and only invests in post-merger SPACs. An advantage of this strategy is “you can look at the portfolio to see whether you like the holdings,” Mr. Roy says.

In turn, the fund is more like an IPO ETF, such as the First Trust US Equity Opportunities (FPX), which holds companies that have recently gone public.

“DSPC is the same but for successful SPAC mergers,” Mr. Roy says.

With a 0.75 per cent management fee, DSPC passively tracks an equal-weighted index of 25 SPAC-derived U.S. firms that have completed mergers, Ms. Gregson adds.

The fund has about US$3.4-million in assets, while its sister ETF, the Short De-SPAC ETF (SOGU-A) launched at the same time, has US$13 million in assets and a management fee of 0.95 per cent. SOGU aims to achieve the inverse daily performance of the same 25 holdings.

DSPC is up 10 per cent since it started trading, while SOGU is down about 18 per cent.