With $56 billion raised through SPAC IPOs in the first ten months of 2020 alone, SPACs have clearly attracted significant investor attention. What about this alternative to traditional IPOs makes it such an attractive investment opportunity? To answer this question, this second instalment of ‘SPAC to basics’ considers SPACs from the perspective of the investor. This is done in three parts. First, the redemption option attached to SPAC shares will be considered in greater detail; often overlooked liquidity costs will be raised and analysed. Second, it will be demonstrated that the SPAC share redemption option gives rise to two different groups of SPAC investors—divesting and non-divesting investors—with different priorities guiding their decision-making. Third, the returns on investment for divesting and non-divesting investors will be considered; it will be shown that divesting investors reap significantly higher returns—more than compensating for the relative illiquidity of their shares—at the expense of the non-divesting investors. Since this instalment refers throughout to the capital structure of SPACs and the roles played by accompanying actors, readers are encouraged to consult the first instalment in this series (‘SPAC to basics (I): structure and timeline’) before continuing.
The redemption option
When considering the redemption option on SPAC shares, the difference between US and UK SPACs becomes of vital importance. To reiterate, this series focuses primarily on the former, though the notable“ shortcomings” ofUK SPACs will be discussed in brief at the conclusion of this section. Of key importance at present is that—unlike their UK counterparts—shareholders in US SPACs have the option to redeem their shares for a pro rata share of the trust account (typically $10.00 plus interest).
This generous redemption option means that investors who purchase units at the SPAC IPO (units, it will be recalled, are typically listed at $10.00) are seemingly getting the deal of a lifetime: near risk-free, interest-earning capital guaranteed, plus a fractional warrant which can be sold separately on the market and is not given up if shares are redeemed. The worst case scenario for such an investor is that the proposed target company is far overvalued, rendering shares in the target post-merger worth next to nothing; the investor would then exercise their right to redeem and “only” receive back their initial investment with interest (their warrants having been rendered near worthless). In short, an investor who acquires a unit at the SPAC IPO is prima facie never any worse off than if he had invested in treasury bonds, but retains the potential to make far more if the share price rises.
Of course, this analysis ignores relevant differences in liquidity between US treasury bonds and SPAC shares and units. T-bills have a three-month average daily trading volume of 168.5 billion; the equivalent average daily trading volume for the thirty most active SPAC shares is 1.92 million. This significantly lower trading volume and the high participation rate of large institutional investors makes SPAC shares far more illiquid than the T-bills in which IPO funds are invested. This was evidenced during the COVID-19-caused liquidity gap in the early months of 2020. The thirteen SPACs that had listed by March 23, 2020 (the S&P 500’s lowest point of the year) were all trading below $10.00 on that date. This phenomenon is at least partly attributable to the liquidity squeeze on hedge funds who had to dump shares to recoup losses on other investments as their newly risk-averse clients redeemed in droves. A limited analogy can be drawn to the position of hedge fund managers invested in SPACs during the Great Recession: following high redemptions by their own investors, hedge fund managers increasingly voted against acquisitions in order to instead acquire their (liquid) pro rata share of the trust account. Much like in March, the value of the immediate liquidity outweighed competing interests as to the value of the potential acquisition.
What is the opportunity cost of this illiquidity? This is not uniform, being dependent on the premium earned by the individual investor’s active management. A 2013 analysis by Andrew Ang, Dimitris Papanikolaou and Mark Westerfield places the liquidity premium of an asset wholly illiquid for two years at 2% (i.e. an investor forgoes an additional 2% ROI by locking the capital into an illiquid investment). The premium may well be higher for hedge funds (given their active management style), though it must be remembered that this premium is for wholly illiquid assets. Notwithstanding the lower trading volume and exposure to concentrated risks, SPAC shares are far from illiquid; even the poorest performing SPAC in March 2020 was still trading at over 92 cents on the dollar. Investors caught in a liquidity bind may therefore have to sell at a discount to par, but they are certainly not prevented from selling entirely. As will be demonstrated below, even adopting the 2% liquidity premium for wholly illiquid assets, SPAC shares acquired at IPO nevertheless offer a handsome return to investors.
Two key distinguishing features ofUK law render the above analysis inapplicable to SPACs listed on the London Stock Exchange. First, and most importantly, shareholders in a UK SPAC do not have access to the same generous redemption option. This means that the above no-loss strategy where an investor buys at the time of the SPAC IPO and liquidates his position pre-merger is unavailable. Second, shares in a UK SPAC are suspended upon the merger announcement, rendering them wholly illiquid pending the publication of an FCA-approved deal prospectus. As such, divesting investors have even less opportunity to dispose of their positions early (potentially losing out on a hot market) and run the higher risk of facing a market slump once their assets are unsuspended. This additional distinction also makes the investment in SPAC shares wholly illiquid for the period of suspension, a further disincentive to investment for actively managed funds.
Not one investor, but two
How do investors employ the redemption option to reap returns much higher than the treasury yields? The answer lies in the fact that investors who get in early frequently sell their shares on the market shortly before or after completion of the De-SPAC. The potential for gains in the hot pre-merger market, combined with the no-loss guarantee provided by the redemption “safety-net”, has given rise two different types of investor: those who play no role in the post-merger target (the“divesting investor”, or“I1”) and those who do invest in the target (the “non-divesting investor”, or“I2”).Three sets of data will be analysed to illustrate this distinction: (i) the redemption rate (i.e. the proportion of common shares redeemed by I1);(ii) the market exit rate (i.e. the proportion of common shares sold by I1to I2 prior to the closure of the merger); and (iii) the refinancing rate (i.e. the proportion of SPACs that require refinancing at the time of the merger to meet cash requirements). All data discussed in the subsequent paragraphs is based off of SEC Form 13F filings, which require disclosures from institutions with at least $100 million in securities and natural persons with at least $100 million in securities investing on behalf of another.
(i) The redemption rate for SPACs is significantly higher than what may be expected. The mean redemption rate forSPACs merged between January 2019 and June 2020 is 58%, and only three SPACs (of forty-seven) in the same period had a redemption rate under 10%.This is telling in three respects. First, it illustrates that the redemption option is far from a mere quirk of SPAC common shares; in many cases it is their defining feature.Second, it evidences that SPAC shares infrequently trade at above the pro rata share of the trust accountleading up to the merger: if that were the case, divesting investors would be better off selling their common shares on the market than redeeming them.Finally, it demonstrates that—irrespective of the proposed target—a significant share of investors have no intention of staying invested post-merger: the capital raised in the SPAC IPO never reaches the target in full. Even these figures, however, underreport the true division between divesting and non-divesting investors, since this data fails to record the proportion of common shares, which—although not redeemed by I1—are nevertheless sold to I2 prior to the closing of the merger.
(ii) We turn now to those shares which are not redeemed: the market exit rate. The average SPAC in 2019 saw 90% of its shares held by 13F-filers redeemed or else passed on to new (I2) investors.This is a better indicator of the true extent to which initial investors fall within the I1 group: looking to exit the SPAC investment before or very shortly after becoming shareholder in the target company. This stands in stark contrast to the traditional function of a public offering (and to the operation of traditional IPOs, whose function in taking companies public SPACs seek to mimic). In a traditional IPO, the very role of the investor is to acquire a stake in the company going public; in a SPAC, we have seen that the vast majority of initial shareholders do not stay around long enough to ever see the birth of a target as a public company.
This data is similarly reflected in those mergers completed in 2020. On average, the ten hedge funds with the largest SPAC investments (the “Top Ten”) sold or redeemed 72% of their individual SPAC holdings in full within three months of the closure of the merger. Within four months post-merger this average increased to 78% and within eight months to 83%. It is therefore evident that many of these large institutional investors have little intention of remaining invested long term. This holds similarly true when looking solely at the more “recognisable” SPAC mergers of 2020. Five of the nine Top Ten members who held shares in Diamond Eagle Acquisition Corp. (the SPAC which took DraftKings public) immediately prior to merger held no shares in DraftKings three months after DraftKings began trading. Similarly, the Top Ten held an average of 621,536 shares of common stock in VectoIQ AcquisitionCorp. (the SPAC which took Nikola public) prior to the merger and only 427,798 shares in Nikola within three months of the merger date.
(iii) The final piece in this analysis is the refinancing rate. 77% of SPACs merged between January 2019 and June 2020 raised additional capital pre-merger from the sponsor and third party investors. On average, the capital thus acquired amounted to 40% of the capital ultimately received by the target. This confirms what was already hinted at by the redemption rate: the SPAC IPO does not in fact raise the capital which the target ultimately receives. As such, the SPAC IPO is not properly conceived (as may be one’s initial instinct) as a means by which investors can acquire shares in the target company through the vehicle that is the SPAC; indeed, initial investors rarely do. Instead, the SPAC IPO is better understood as a mere procedural stepping stone that allows the SPAC to take the target public without going through the traditional IPO procedure and crossing its accompanying hurdles.
The two key stages in the lifecycle of a SPAC—the SPAC IPO and the De-SPAC—are therefore largely independent. So too are the two groups of investors (divesting and non-divesting) that operate within each stage: a majority of investors who acquire at the SPAC’s IPO have given up their positions by the time of the De-SPAC.
Winners and losers: the cost of free money
Having defined and demonstrated the distinction between divesting and non-divesting investors, we turn now to the implications of this distinction; in particular, we analyse the differences in return reaped by each group of investor.
To this end, it is important to understand the trends affecting SPAC shares post-merger. On average, the share price of post-merger of 2019-2020 SPACs fell 34.9% within twelve months of the merger. Compared to performance of the IPO index in the same period, performance is -47.1%.
Who bears the cost of this fall in the share price post-merger? One might initially be tempted to point to the sponsors as the losers in our equation. After all, the sponsor frequently steps in to help ensure that the SPAC has sufficient cash to consummate the merger. Moreover, the sponsor typically (and sensibly) waives their redemption right, and can therefore not exit the deal which the SPAC has entered into; indeed, the sponsor also typically enters a lock-up agreement preventing the sale of their founder shares within one year. It would, however, be surprising if the founder of the SPAC were the one to foot the oversized bill and then went on to fund more SPACs (as so many SPAC sponsors do). Even more so when one recalls that many sponsors are experienced private equity firms and executives.
Indeed, average returns for sponsors hover around 393% three months out, and at around 187% at the typical lock-up agreement expiration date. How is it that sponsors see triple-digit returns when SPACs themselves fair so poorly? The explanation lies in the cheap acquisition of shares at the inception of the SPAC: as will be recalled, sponsors typically acquire 20% of post-IPO equity for nominal consideration. Therefore, even if post-merger performance is poor, sponsors make it out with nice returns because they did not buy at the high post-merger asking price.
Divesting investors also typically see a handsome return on their relatively short-term investments—around 11.6%. As explained earlier, these investors always retain the option to redeem at more than their buy-in price and therefore are far less exposed to the risk of an overvalued target. The bill instead falls to the non-divesting investors: without a redemption safety-net post-merger, these investors shoulder the risk of an overhyped merger and of the opacity of information that frequently accompanies the SPAC process.
To conclude, SPACs offer every incentive to investors to get in early and get out quick. This has two dangerous implications. First, this imbalance between divesting and non-divesting investors tends to benefit experienced institutional investors who know how to “play the field” at the expense of poorly informed retail investors. So much for SPACs making the private-public transition more available for the“little man”: while retail investors sometimes play a role in the post-IPO, pre-merger SPAC, empirical data demonstrates that this profitable window of time is occupied primarily by large institutional investors. Second, the divestment incentive renders the SPAC IPO no more than a procedural requirement to enable the SPAC’s work-around of the traditional IPO process. This is because the capital raised by the SPAC in its IPO is of little relevance to the final acquisition; much of the capital raised by the SPAC in its IPO is redeemed and, even if not, initial investors frequently dumps their position on the market pre-merger. It is PIPE deals with the sponsor and third parties which are the target’s hidden patrons and the non-divesting investors who ultimately foot the bill.
 Nessa Anwar, “SPAC listings hit a record high in 2020”, CNBC, 22 November, 2020, available at:https://www.cnbc.com/2020/11/23/what-are-spacs-2020-saw-record-number-of-shell-companies-listed.html.
 Some common investor risks identified herein (particularly those of non-divesting investors) are shared by sponsors (who typically hold 20%of post-SPAC IPO common shares); for example, since sponsor-held Class B or Fcommon shares (“founder shares”) typically lack a redemption option, sponsors are exposed to the same risk of a post-merger share price slump as non-redeeming investors. Note also that the sponsor (as holder of “founder warrants”) benefits from the parallel upside of the typically hot market for warrants leading up to the acquisition. For more information on the risks and rewards of sponsors stay tuned for the upcoming fourth installment in this series: ‘SPAC to basics (IV): sponsor perspective’.
 This terminology is explained later in this installment: in short, a divesting investor is one who liquidates (through sale or redemption)their SPAC holdings shortly before or after the SPAC IPO, with little (if any)intention of remaining invested long-term.
 For more information on the differences between the two, see: Thomas Vita, Fiona Millington and Kevin Connolly, “SPACs: The London alternative”, Norton Rose Fulbright, October 2020, available at:https://www.nortonrosefulbright.com/en/knowledge/publications/94734f5e/spacs-the-london-alternative#:~:text=Key%20differences%20between%20UK%20and%20US%20SPACs,-Whilst%20SPACs%20first&text=In%20the%20US%2C%20shareholder%20approval,proxy%20statement%20with%20the%20SEC.
 Shortcomings for initial (i.e. pre-merger) SPAC investors, since they lack the redemption option available to initial US SPAC investors.It is argued in this installment that this advantage for initial SPAC investors is in fact a cost burdened by post-merger investors in the target company.
 Following announcement and approval of the proposed target.A majority of shareholders must approve the target ((NASDAQ Rule IM-5101-2(d);NYSE Listed Company Manual Section 102.06 NYSE), though a shareholder only looking to redeem (i.e. a divesting investor) has every incentive to approve the target, as this makes redemption available sooner. Of course, this overlooks the reality that many investors who do not intend to stay invested post-De-SPAC may reap more than the promised $10.00 plus interest on redemption by instead selling their shares on the market. That said, by voting against the proposed target the shareholder runs the risk that the SPAC will be unable to find a new target within the allotted time (typically 24 months), thereby rendering their shares worthless. For more information on the time constraints on SPACs, stay tuned for the fourth installment in this series: ‘SPAC to basics (IV): sponsor perspective’.
 The yield on 2-year Treasury bonds as of 15 December, 2020is 0.13% This, however, is an overestimate of the actual return on capital in the trust account since this is typically invested in T-bills with maturity of180 days or less. 26-week T-bills currently have a yield of 0.08% and would return 0.1664% if reinvested over two years. See current data on treasury yields:https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yieldYear&year=2020.
 Following the splitting of units 45 days after the SPACI PO.
 Some SPAC units also include rights, which entitle their holder to acquire a fraction of a share at no additional cost if a target is successfully acquired: Winston & Strawn LLP, “SPAC 101: Transaction Basics and Current Trends”, accessed on 15 December, 2020.
 Putting aside, for the time being, that the capital is locked up for the two years in which the SPAC searches for a target, and is therefore less liquid than T-bills (see following paragraph). Even incorporating a steep liquidity discount, however, return on SPAC shares and warrants purchased at the IPO far out-earn the more liquid T-bills and money mutual funds.
 The capital held on trust by the SPAC post-IPO is typically held in T-bills with a maturity of 180 days or less; otherwise, the capital in the trust is invested in US Treasury money mutual funds which invest in T-Bills and repurchase agreements: Cynthia Krus and Harry Pangas, A Primer on SpecialPurpose Acquisition Companies, Sutherland Asbill & Brennan LLP, March 2016, available at: https://www.publiclytradedprivateequity.com/portalresource/SPACsOverview.pdf.
 September–November, 2020: US Treasury Trading Volume,Securities Industry and Financial Markets Association, last accessed 15December, 2020, available at:https://www.sifma.org/resources/research/us-treasury-trading-volume/.
 Most Active SPACs, Yahoo Finance, last accessed 15December, 2020, available at:https://finance.yahoo.com/u/yahoo-finance/watchlists/most-active-spacs.
 Primarily hedge funds, all exposed to similar market risks.This means that an event which restricts the liquidity of one large investor islikely to impact other investors similarly; the same cannot be said for the diverse set of investors in treasury bonds. The five largest hedge funds by investment in SPACs are (as of 30 September, 2020), in decreasing order of portfolio market value: Millennium Management LLC, Magnetar Financial LLC,Glazer Capital LLC, Polar Asset Management Partners Inc., and Linden AdvisorsLLC. See further 13F Portfolio Leaders, SPAC Research, 23 November, 2020, available at: https://www.spacresearch.com/newsletter?date=2020-11-23.
 Indeed, liquidity is one of the biggest incentives to holding T-bills: treasury bonds are the most traded security in the world.
 Having fallen 34% from its February peak to 2,237.40.
 It has been frequently reported that SPAC shares will not trade below $10.00; see, for example, Robert Reed in the Idaho Reporter, who commented that “[t]he price [of the SPAC Fisker and Spartan Energy AcquisitionCorp] will NOT go below $10”: Robert Reed, “For SPAQ stock one thing is certain-It won’t go below $10”, Idaho Reporter, 19 October, 2020, available at:https://www.idahoreporter.com/2020/for-spaq-stock-one-thing-is-certain-it-wont-go-below-10/.
 Each trading in the range of $9.25 to $9.85 per share: RenaissanceCapital, “Blank check IPOs bounce”, Nasdaq, 23 March, 2020, available at:https://www.nasdaq.com/articles/blank-check-ipos-bounce%3A-all-13-of-the-years-spacs-trade-below-%2410-redemption-value-2020.
 A similar phenomenon was observed in 2016, where GoresHolding—a post-IPO, pre-merger SPAC—was trading at below $10. Dane CapitalManagement LLC (a hedge fund) suggested that one of the reasons for the stock’s undervalue was the fact that investment in the SPAC was “too…illiquid for many institutions to find it investable”: see Dane Capital Management LLC, “GoresHoldings: Delicious Opportunity, Stock Underpriced, Warrants DramaticallyUndervalued”, 15 August, 2016, available at:https://seekingalpha.com/article/3999470-gores-holdings-delicious-opportunity-stock-underpriced-warrants-dramatically-undervalued.
 Investor redemptions in hedge funds soared to $85.6 billion in March of 2020 (2.7% of global industry assets): Hugh Leask, "Hedge fund redemptions skyrocket in March as investors pull USD 85bn amid Covid-19 pandemicfears, new data shows", HedgeWeek, 19 May, 2020, available at: https://www.hedgeweek.com/2020/05/19/285738/hedge-fund-redemptions-skyrocket-march-investors-pull-usd85bn-amid-covid-19.
 Note, however, that SPACs operated slightly differently: itwas generally a prerequisite of redemption that one voted against the merger; contrast the position today (and discussed in this article) where investors areat liberty to vote in favour of a merger and nevertheless elect to redeem their shares. See further on the position of SPACs during the Great Recession: FloydWittlin and Kristen Ferris, "Can the SPAC Make It Back?", BloombergLaw Reports—Mergers & Acquisitions, 2010, available at:https://www.morganlewis.com/-/media/files/docs/archive/can-the-spa--make-it-back_5901pdf.ashx.
 As Benjamin Howe, Founder and CEO at AGC Partners, put it honestly at the time: “There are about 30 hedge funds that control the SPAC market, and they’ve been clobbered by the markets”: Phil Wahba, “Cheap acquisitions may be SPACs' last chance”, Reuters, 5 January, 2009, available at:https://in.reuters.com/article/markets-stocks-ipos/rpt-ipo-view-cheap-acquisitions-may-be-spacs-last-chance-idUSN0537042420090105.
 Known as “clientele effects”: Yakov Amihud and Haim Mendelson, “Liquidity and Stock Returns”, FinancialAnalysts Journal, Vol. 42, No. 3, June 1986, pp. 43–48, JSTOR,www.jstor.org/stable/4478932, accessed 15 December, 2020.
 Andrew Ang, Dimitris Papanikolaouand Mark Westerfield, “PortfolioChoice with Illiquid Assets”, Netspar Discussion Paper No. 10/2010-092, August2013, available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817522.
 By forgoing the ability to reap the benefits of bothrelatively well-known alpha sources with minimal impact on return as well asinfrequent but highly profitable alpha “jumps”: see further Jamil Baz, ChristianmStracke and Steve Sapra, “Valuing a Lost Opportunity: An AlternativePerspective on the Illiquidity Discount”, PIMCO, July 2019, available at:https://www.pimco.com/en-us/insights/viewpoints/research/valuing-a-lost-opportunity-an-alternative-perspective-on-the-illiquidity-discount.
 Renaissance Capital, “Blank check IPOs bounce”.
 Or, more accurately, SPAC units acquired at IPO which aresplit into common shares and units 45 days after the IPO.
 The 2% illiquidity premium on two-year reinvested 26-weektreasury bonds (currently yielding 0.08%) would make for an opportunity cost of2.1664%. Returns on SPAC shares for divesting investors, estimated at 11.6%,clearly overcome this threshold.
 SPACs are listed either on the AIMmarket or the Standard segment of the Official List. Since SPACs are defined as shell companies, they lack theindependence and track record Listing Rule requirements to be listed on thePremium segment of the Official List. See further as to the differences betweenUS and UK SPACs: Thomas Vita, Fiona Millington and Kevin Connolly, “SPACs: TheLondon alternative”, Norton Rose Fulbright, October 2020, available at:https://www.nortonrosefulbright.com/en/knowledge/publications/94734f5e/spacs-the-london-alternative#:~:text=Key%20differences%20between%20UK%20and%20US%20SPACs,-Whilst%20SPACs%20first&text=In%20the%20US%2C%20shareholder%20approval,proxy%20statement%20with%20the%20SEC.
 Owing to the characterisation of the SPAC-target merger asa reverse takeover under the Listing Rules.
 Contrast the US position.
 The terminology of “divestment” is borrowed from Klausnerand Ohlrogge, “A Sober Look at SPACs”, Stanford Law School, available at:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3720919.
 Non-divesting investors also include investors whichacquire shares post-merger; their defining feature is not that they held sharesboth pre- and post-merger, but rather that they did not divest securitiespre-merger (even if they had no securities to divest). This subtle distinctionbecomes relevant when considering the relative returns reaped by divestingversus non-divesting investors.
 It is only this latter group (which, it will be seen, is asmall minority) which can be said to fulfill the PE function of the SPAC.
 The warrant retention rate (i.e. the proportion of warrantsdisposed of by I1 prior to the merger) will also be touched upon,though available data is insufficient or inaccessible to allow for a fullanalysis. This is an area seemingly untouched upon by current research andacademic study and would benefit from a closer examination in the future.
 Since 13F-filers hold an average of 82% of SPAC sharespost-IPO and 79% of shares pre-merger, they represent a significant portion ofSPAC shareholders and are therefore a valuable indicator of SPAC trends.
 §13(f) of the Securities Exchange Act of 1934.
 The median is an astounding 73%.
 Klausner and Ohlrogge, “A Sober Look at SPACs”.
 In over 50% of SPACs merged between January 2019 and June2020, two thirds of common shares were redeemed: Klausner and Ohlrogge, “ASober Look at SPACs”.
 Typically $10.00 plus interest.
 The market exit rate: see (ii). Another relevant indicatorof the large share of initial investors looking to exit pre-merger which is notrevealed by (indeed, is concealed by) the redemption rates just reported is thelock-up agreements sometimes entered into between the SPAC sponsor and largepublic shareholders. These agreements bar the shareholder from redeeming or sellingtheir shares prior to the closure of the merger, thereby ensuring that there issufficient cash in the SPAC to meet the cash requirement set by the targetcompany. These separate agreements—not being capital directly investedin the SPAC—are also not reflected in therefinancing rate (iii). This further goes to show the extent to which initialinvestors seek to avoid retaining their common shares post the closure of themerger.
 Klausner and Ohlrogge, “A Sober Look at SPACs”.
 Up to the most recent 13F filing date: 30 September, 2020.
 Based on 13F filings as of 30 September, 2020. See SPACResearch, “13F Portfolio Leaders”, available at:https://www.spacresearch.com/holder.
 I.e. they held no more common shares.
 All data employed in these calculations has been compiledin a spreadsheet available here:https://universityofcambridgecloud-my.sharepoint.com/:x:/g/personal/fh384_cam_ac_uk/Efl_z5vhp0BDiiwyExsWlBkBOnxLdNx7DFriDcgu92aviA?e=nFQ295.The data used is drawn from 13F filings between 31 March, 2018 and 30September, 2020. The full EDGAR advanced search system made available by theSEC can be accessed here: https://www.sec.gov/edgar/search/.
 Based on the most recent 13F-filing prior to the mergerdate on 3 June, 2020.
 This is, in fact, an understatement of the Top Ten’sdivestment from Nikola as it ignores VectoIQ warrants: Top Ten members who heldcommon share in VectoIQ also held a total of 9,562,206 warrants, eachredeemable for one share of common stock at $11.50: see the VectoIQ AcquisitionCorp prospectus:https://www.sec.gov/Archives/edgar/data/1731289/000104746918003835/a2235755z424b4.htm.
 Including those SPACs which raised no additional capitalpre-merger.
 Though in some cases the capital raised pre-merger is manytimes that raised through the SPAC IPO: John Luttig, “SPAC Attack: everything afounder or investor should know”, 17 July, 2020, available at:https://www.rcis.co.za/the-investor-september-2020/. This makes the capitalraised in the SPAC IPO is a poor indicator for the size of the final merger.
 Klausner and Ohlrogge, “A Sober Look at SPACs”.
 Either by redeeming their shares, disposing of their sharesin the market or by a combination of the two.
 Which closed mergers between January2019 and June 2020.
 Klausner and Ohlrogge, “A Sober Look at SPACs”.
 Often, the lock-up also automatically expires after ashorter period if shares are trading above $12.00. Lock-ups can also vary inlength, though they are usually in the range of 30 days to 12 months.
 The Gores Group LLC and TPG Capital (both PE companies)have alone sponsored nine SPACs between them since 2015. Indeed, PE companiesfrequently sponsor multiple SPACs at a time: Jeffrey Smith and Michael Heinz,“Private Equity and SPACs—A Mutually Beneficial Relationship”, Bloomberg, 12August, 2020, available at:https://news.bloomberglaw.com/securities-law/insight-private-equity-and-spacs-a-mutually-beneficial-relationship.
 “Why Choose a pre-IPO SPAC Investment a.k.a. Sponsoring?”,Shanda Consult, February 2020, available at:https://shandaconsult.com/spacs/spacs-potential-gains-and-returns-for-sponsors/.
 Klausner and Ohlrogge, “A Sober Look at SPACs”.
 See the first installment in this series for a refresher onthe capital structure and typical lifecycle of a SPAC.
 Klausnerand Ohlrogge, “A Sober Look at SPACs”.
 “[SPACs] should not be sold to retail investors at such anearly stage”: Howard Schilit, head of accounting consulting firm SchilitForensics. Alexander Osipovich and Dave Michaels, “Investors Flock to SPACs,Where Risks Lurk and Track Records Are Poor”, 13 November, 2020, available at:https://www.wsj.com/articles/investors-flock-to-spacs-where-risks-lurk-and-track-records-are-poor-11605263402.
 An oft-cited benefit of SPACs is that they are a greatequalizer; see, for example, Phil Haslett and Brianne Lynch: “SPACs can offerretail investors access to high-demand IPOs, typically only available toultra-high-net-worth and institutional investors”. Phil Haslett and BrianneLynch, “SPACs: What Advisors and IPO Investors Should Know”, ThinkAdvisor, 22November, 2020, available at:https://www.thinkadvisor.com/2020/11/22/spacs-what-advisors-and-ipo-investors-should-know/.
 The share of 13F-filing shareholders immediately post-IPOscarcely changes right up to the merger (average share ownership by 13F-filersfalling a mere 3% from 82% post-IPO to 79% pre-merger: Klausner and Ohlrogge,“A Sober Look at SPACs”). This provides retail investors little opportunity toaccess the double boon of redemption safety net and typically hot pre-mergershare markets.