- Two new ETFs are giving investors the chance to go long or short on post-SPAC public companies.
- Tuttle Capital said the funds will track the top 25 so-called de-SPACs in a Bloomberg index.
- "You can decide how you want to play it, from the long side or the short side," the CEO said.
- See more stories on Insider's business page.
Two new exchange-traded funds, purely exposed to companies that went public with a SPAC, are now trading on the New York Stock Exchange.
The funds, launched by Connecticut-based Tuttle Capital Management, began trading Wednesday with the goal of allowing investors to bet on "de-SPACs," a term for the businesses that went public in a reverse merger with a blank-check firm known as a Special Purpose Acquisition Company.
The De-SPAC ETF, trading as DSPC, will track the performance of 25 of the largest de-SPACs listed on a Bloomberg Index.
Meanwhile, the Short De-SPAC ETF, trading as SOGU, is going short on those same companies, including names like Clover Health, Lordstown Motors, Velodyne Lidar, and QauntumScape.
"You can decide how you want to play it, from the long side or the short side," Matthew Tuttle, Chief Executive Officer and Chief Investment Officer of Tuttle Capital Management, said in an interview with Insider. "The beauty of this index is this index moves. I can't tell you which direction it's going to move, but it moves."
Tuttle said there was "unmet need" for de-SPAC exposure on the long and short side.
Shorting the sector is difficult, though, because the companies are in high demand, it's difficult to find shares, and it's expensive, he said.
"We decided we'll put in the work, we'll put this together and be able to give people an easy way to do it," Tuttle said, noting that the ETF will use individual swaps, formally known as derivative contracts, on each of the 25 companies in order to short the shares.
Short sellers have descended on the market in recent months and have begun making hundreds of millions betting against companies that went public via SPAC.
Clover Health, which went public via a SPAC backed by billionaire investor Chamath Palihapitiya, ran into problems shortly after listing when short-seller Hindenberg Research published a report accusing the company of misleading investors, customers, and the federal government, causing shares to plummet.
So far this year, the The De-SPAC Index has dropped TK%, according to Bloomberg data.
Experts have begun warning the red-hot SPAC craze would cool off. Avinash Rugoobur, the head of electric vehicle firm Arrival, for example, told Insider he predicted a slowdown in the trend.
Already in 2021, the number of companies going public via SPAC has set a record. According to data from SPAC Analytics 324 SPACs have raised about $103 billion. The craze has attracted retail investors, and even celebrities, like former NBA star Shaquille O'Neal and Jay-Z.
The Securities and Exchange Commission has warned against investing in celebrity-backed SPACs, though. The Wall Street Journal found the SEC also has reportedly launched an inquiry into the SPAC frenzy, with one official warning of issues in the sector.