Over the next two years, $103 billion in SPAC capital will be on the hunt for acquisition targets.
Yesterday, SEC issued an investor alert regarding celebrity SPACs without naming names.
The warning came as more and more celebrities are getting involved in the SPAC market.
Last month alone, MLB All-Star Alex Rodriguez and former NFL player Colin Kaepernick announced their plans on sponsoring their own SPACs.
NBA Hall of Famer Shaquille O'Neal and music mogul Jay-Z are among the other celebrities who have SPAC connections.
"Celebrities, like anyone else, can be lured into participating in a risky investment or may be better able to sustain the risk of loss," the SEC said in an investor alert. "It is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it or says it is a good investment."
SEC also reminded investors, SPAC sponsors are allowed to have a conflict of interest and that their economic interests may differ from that of other shareholders. Sponsors typically acquire shares at more favorable terms. They could also have an incentive to complete the deal on terms less favorable for the average investor.
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