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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (26127)	2/23/2007 7:42:06 AM
From: Oblomov	Respond to of 78744

Based on my research on Marathon, the downside risk (i.e. no deal is culminated, the warrants are worthless, and the shareholders are redeemed) is between 10 and 15%, while the potential upside is on the order of 100% in an 18 month timeframe. Because of these payout odds, and the fact that the stocks don't move much prior to a deal being announced, many hedge fund managers see SPAC units as a form of "enhanced cash" (I know, people always put adjectives in front of "cash" at the height of a bubble). You are correct-this is a speculation rather than value investing per se. MAQ/U is a small position for me. One of the things I looked at is the underwriter. Underwriters get a share of units of a SPAC. Most SPACs seem to be underwritten by small firms that also sponsor OTCBB stocks, which seems a bit shady to me. MAQ, on the other hand, was underwritten by Citigroup, Dekania was underwritten by Merrill, and Union Street was underwritten by BoA. Again, no guarantee of success, but I am willing to speculate that the bulge bracket firms are less likely to underwrite something with little chance of success.