Hey everyone meet kevin here in this video we're going to be talking about sparks and what sparked sparks and comparing sparks to specs yeah. Now, there's a lot here to digest, but we're going to make it really really easy, because i have a feeling these are going to become just as popular as spax were in 2020 at the beginning of 2021 and now you're gon na start. Seeing these things trading on markets called sparks and you got ta know what they are so first to understand sparks you have to understand. Specs.

Remember that a spec is really consistent of a blank check company that leaders or promoters and their attorneys put together. Then they get a pool of investors, the pipe and they raise money together, usually at a par value of ten dollars, though sometimes twenty dollars and the individuals who invest get a share of this back at a at whatever the par value is so ten dollars or Twenty dollars - and there are also warrants that people could invest in which are basically just options, call options to be able to purchase more shares at some point in the future when the company itself calls for redemptions. Now, don't worry if you lost any of that, not that big of a deal, but the most important part is that a spac is just a bundle of money. That is public and it's looking to take an existing company, that's private public, and so they merge together and now they're public together and then they change the name and perfect you're done now.

You've taken a company that wasn't public public through this streamlined sec review process known as a spac. It's had one heck of a reputation, though, because a lot of specs ipo with these investor presentations that aren't exactly this realistic presentation of what the company is likely to do. But instead there are a lot of opium about what the company might do and because they're specs they go through less regulation. So a lot of these performance statements are accepted.

Now here's the thing nasdaq has reported that on average, the first day that spax end up ipoing, they tend to run up about 18. Obviously, there are a lot of variables here, but that would be about a dollar and 80 profit on average per share on ipo day, but now this is where things get fun. Wouldn't you like the opportunity to buy a potential spec at whatever the ipo price is so, let's say, for example, dwack. The donald trump's back goes from ten dollars to fifty dollars.

Wouldn't it be nice to have the right to buy shares at ten dollars. That'd be pretty cool right and since the average expected ipo profit is a buck 80, it would seem that the value of being able to buy shares at an ipo price for a spac would be somewhere between maybe a buck 80 and some larger number, depending on How valuable people think this ipo is actually going to be? Well, that's where sparks come in special purpose acquisition rights, and then a company because remember a spac is a special purpose acquisition company. But a spark is a special purpose: purpose acquisition, rights, company and bill ackman is going to be one of the first to actually do that through his pershing square capital management company he has filed for the first spark now, if, instead of buying a spec where you Get shares you're interested in a spark you're going to get the right to buy shares of a company at ipo for zero dollars and you're going to be able to sh to trade that right on the public market. So that means on the public market.

We're going to start seeing sparks floating around at maybe five dollars, and that would mean you're paying five dollars for the right to pay ten dollars for that company when it ipos now what's interesting is the way this works is when the spark finds a target company. It asks the investors for money to merge, however, before it finds a company, these rights are assigned and they're allowed to be trading on stock exchanges and since sparks don't raise money in advance, there's really no fixed amount of the sparks that could exist or these rights To buy something at ipo price, basically, it's a blank blank check company. It's like literally like a blank check company used to be hey. Here's 500 million dollars go find a company.

We know we all paid in 10 per share whatever go, find a company and and bring it public now. It's kind of like hey here, are all bill. Ackman's friends who are like sure, yeah we'll take your sparks. Who can then, if they want, sell these rights on the stock market and then they'll have trading value? Remember how much they're worth really depends on how much the company is expected to be ipoint, for because all it is, is the right to buy the company at the ipo price, so the way sparks are going to work compared to specs specs you raise money, you Find a company to merge with usually within two years, you pay the promoters, a big fee.

You get massive commissions like this is how people like chamath, get rich off doing these spacks and boom. The company goes public like open door. Sofi, for example, goes public people who got in at ten dollars are doing great uh and the people who who bought later or well they're buying later they're investing in an earlier stage. Company now remember, specs can also go below ten dollars.

Look at shift technologies. Look at hippo uh, look at uh. You know any any number of specs like a beachbody right, not a surprise. These things can go under ten dollars.

That's because oftentimes they're overvalued at 10. Now, investors, with a spark, have a cool opportunity where they're not putting any money up. They have the right to buy shares thanks to that spark unless they sell that spark. They have the right to buy shares at ipo price and they get a new spark for the next deal that that manager puts together.

So it kind of incentivizes you to actually buy the shares at ipo because then you're going to get another spark or the right to buy the next deal. So the cool thing here is you'll at some point. See these weird instruments trading on the market that are just basically rights to buy at ipo price. I expect them to be incredibly speculative, but people are going to be likely very excited about these, because if they go in on ipo price on on you know one time they'll be able to do it again in the future.

It's almost kind of like having an nft right to buy these spacks or now sparks at ipo, which is kind of crazy. So now it comes down to really betting on how good of a job you think the promoter like somebody like bill ackman will be able to do and how quickly do you think he can pull it off and how many times do you think he can pull It off the cool thing: is it's going to be easy to market these acquisition rights? So, for example, if a potential acquisition is announced and the spark value starts trading at three or four dollars, then the understanding is that hey investors must like this idea, because, obviously it's worth uh whatever we expect the ipo price to be plus three or four dollars, Because maybe the expectation is that it's gon na run even beyond that, so a potential acquisition, let's say it's announced with a spark and then the value drops to like 25 cents or something really low. This would kind of be a sign that investors are saying. Oh, that's probably not going to ipo well or it'll fall after ipo like robinhood, but anyway the instant feedback could actually end up being very valuable for somebody like bill ackman the promoter to see hey.

Is it a good idea to be bringing this company public, or should we potentially look for a different company? You know if this one's not gon na work out, because maybe the market doesn't like it so anyway. Of course, all this needs uh sec and regulatory approval, and right now, spax are not loved by the sec, so we'll see how sparks the evolved form of spax end up working out. I mean i really feel like this is like uh, a pokemon like a bulbasaur evolving into blastoid, like it's just continuing to get more complicated and we continue to get new fangled ways of losing money and becoming bag holders. But at the same time, this could also improve some of or at least improve on some of the faults that the sec sees with spax, specifically with hey like what, if the company isn't worth ten dollars at ipo, what if it's worth five dollars at ipo? Well, whatever that number is, it could be a little bit more of a floating valuation.

Whoever has a spark will have the right to be able to buy it at ipo. This is kind of cool, we'll see how the sec responds to this. The nyse so far seems interested in this, but pretty soon you could start seeing sparks trading on the stock market, and now you kind of have a little bit of a first look outline as to what the heck these crazy things are and boy. Oh boy, this market is nuts thanks, so much for watching check out the programs linked down below and building your wealth and we'll see in the next one.

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