This company is a blank check firm focused on acquiring businesses in the travel and leisure industry.
So after hearing that “As of 9th March 2021, Freetrade cannot support elective Corporate Action events, including Rights Issues, at this time.” Can you confirm or deny that all these new SPACs and generally any shares are actually limited in what you get when you buy? I ask here as I like the SPAC/blank cheque firms for investing X amount in but need to know if I actually get all the benefits
I mean, if I buy a share I expect the potential benefits especially when a SPAC often ends in this way. If FT doesn’t let us then surely there should be a BIG warning as many will buy expecting to actually have the full benefits and would only find out then complain when it is too late.
I bought into SPACs thinking the below but if this isn’t the case at FT I do feel that I have been mis-led slightly.
- They can exercise their warrants. If an investor wants to purchase more stock, they can usually do so below market value. A SPAC warrant gives common stockholders the right to purchase stock at a certain share price. In this case, investors may be able to get stock for $11 per share even when the market value has reached $20 or more. Right off the bat, this warrant gives investors an upper hand against the general public.
And if this isn’t the case then great and sorry I mis-understood but it isn’t clear and TBH FT have kinda avoided topic a bit and could have been very clear when people asked.
This needs answering come on FT
Hey Gary, we’re scaling our engineering team currently to allow us to fully support the elective actions. Until then, it’s just not something we can support right now or can guarantee we will support for individual stocks.
We’ve had a high number of SPACs on the app go through the entire lifecycle and reverse merge with their target companies already, and this has not been an issue. In the case of a big elective corporate action, we can review if this is something we can support.
The main corporate actions relevant to SPAC shares you buy on Freetrade would be voting to approve the merger and redeeming shares. You can’t buy or access SPAC warrants on Freetrade so they’re not part of the discussion.
If not enough people vote to approve the merger it can lead to delays, this has happened before, where though everyone may be in favour of merger they don’t vote, with many SPAC’s having high retail ownership this has led to delays on some mergers.
With SPAC’s, holders can redeem their shares for the cash value held in trust, this is usually ~$10 and is why you don’t typically see SPAC’s fall much below $10 pre merger, because if they do, someone could buy and redeem and profit the difference risk free. This facility is not available on Freetrade, but it’s not clear to me why you’d expect or want it? As long as the facility is there for institutions to redeem shares, the arbitrage available should keep the floor on the price.
To clear up a potential misconception you don’t receive warrants because you bought shares in a SPAC, unless you buy the units, which you can recognise by a U after the ticker. Units are not available to but on Freetrade or Trading212 AFAIK.
Thanks for the reply
I totally understand the issues with scaling up and appreciate not getting voting rights etc that people have been discussing around the forum. I do however feel it is simply unacceptable to not guarantee that if the company people buy shares in does offer discounted shares, be it a SPAC or not, then we don’t get the opportunity.
My point is still the same that if this isn’t guaranteed on all shares surely there should be a warning so it is clear or it is just setting up a potential PR disaster.
I’ve been super impressed with FT and invited family to join but do feel if you don’t get “rights issue” benefits when possible it really should be clear when buying. I read that some members got the option last winter and reading the FT note it implies it has stopped. This really should be super clear to members that it has changed is basically my point and we shouldn’t find out when a member posts on a forum
Other than this issue though on a fantastic product!!!
Thanks for a very informative answer, much appreciated I maybe wasn’t very clear it wasn’t just about SPACs but in general.
My main worry was in the last 6 months members have used the rights issue option according to the forums and if that has now been removed it should be much clearer and not only “heard on the grapevine” of a forum.
I agree not allowing participation in rights issues and the like is problematic and should be a priority (regardless of whether taking up rights is a good idea or not).