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The Fairy Tale Decision of Holding SPAC Shares Past Midnight: A study on the Factors Affecting the Probability of a SPAC Being Good or Bad Prior to Approval Date

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The Fairy Tale Decision of Holding SPAC Shares Past Midnight: A study on the Factors Affecting the Probability of a SPAC Being Good or Bad Prior to Approval Date

Choupani, Shawn (2021) The Fairy Tale Decision of Holding SPAC Shares Past Midnight: A study on the Factors Affecting the Probability of a SPAC Being Good or Bad Prior to Approval Date. Masters thesis, Concordia University.

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Abstract

This study further examines a two-portfolio theory by Sousa and Jenkinson 2011, where the two portfolios are separated as “Good” and “Bad” SPAC (Special Purpose Acquisition Company) deals. Our paper utilizes new generational SPAC IPO data for the period between 2011-2018, by analyzing the determinants, firm and market specific, that affect the probability of a deal being “good” or “bad”. We use hand collected data on the trust value and common shares outstanding for each quarter for 75 SPAC IPOs from their 10-Qs located in EDGAR and Fintel, to calculate Trust Value Per Share (TVPS), TVPS is defined as the pro-rata value of each common share outstanding (excluding sponsor shares) divided by the SPACs trust value. We categorize a SPAC deal as “Good” if the market price is greater than the TVPS, and a deal as “Bad” if the market price is below the TVPS, one day before the shareholder approval date, respectively. Our results indicate that 50 SPAC deals were “Good”, and 25 deals were “Bad”. These figures differ from those of Sousa and Jenkinson, which indicates a clear effect of the structural change of SPACs after 2011. Our logistic regression indicates a positive and statistically significant relationship between the dependent variable “Good” with the cumulative return of the SPAC and IPO Size, while a negative relationship was seen with the number of days between IPO and announcement, and Trust Value. We suggest investors redeem their shares prior to approval regardless of being classified as “Good” or “Bad”.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Choupani, Shawn
Institution:Concordia University
Degree Name:M.A. Sc.
Program:Finance
Date:4 August 2021
Thesis Supervisor(s):Pai, Yu-Jou
ID Code:988764
Deposited By: shawn choupani
Deposited On:29 Nov 2021 16:37
Last Modified:29 Nov 2021 16:37
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