SPAC NAV Merger Redemptions

[Apscott9]

I just wondered if I could get some clarification on the SPAC NAV merger redemption process.

One of the benefits of investing in a SPAC close to the NAV (Net Asset Value) price which in most cases is $10.00 a share (apart from $PSTH which is $20.00 a share) is that when the proposed merger takes place, if the share price has dipped below the NAV to say $9.00 a share, shareholders are entitled to redeem their shares at the NAV, which in most cases is $10.00 a share.

Shareholders are also given the right to vote for or against any particular merger.

Having sought clarification from the Freetrade Customer Service team, it would appear that neither of these rules are applicable to Freetrade Customers.

Put simply, trading a SPAC through Freetrade is like trading any other stock.

I wondered if @Viktor or @Adam could provide some clarification as to why this is the case as this has quite a large impact in the risk element when investing in a SPAC and does not appear to be something that has been previously communicated by the team.

SPACs have proven to be a great way for a retail investor to get involved with a company at the beginning of its public company journey, but not having the rights and ability to redeem at the NAV should the price go down pre-merger or if they simply disagree with the business combination being put forward seems a little frustrating.

[AdamL (Adam)]

So if a spac is trading at $8, I would have to sell at $8 rather than redeem for NAV? That takes out a major selling point for spacs . Yes this should be clarified as other votes and mergers have been conducted.

[Apscott9]

That’s what I’ve been told by customer services after querying it yes. We are not entitled to voting rights on any spac merger, nor can we redeem for the NAV

[14me24u]

Is this flagged when you buy a SPAC on FT? (I certainly haven’t seen it in e.g. VACQ terms and conditions).

Let’s hope this is just a case of the mechanisms for voting and redemption have just not yet been implemented in the platform.

If SPACs are here to stay, then it could be another chance for FT to set the standard.

Personally, I wouldn’t even mind if they took a little commission on the redemption whether via the FX spread or some fixed fee explicitly stated on purchase.

For voting, I’m not sure what the issues might be, perhaps platform share holders’ votes would have to be translated into Yay or Nay based on simple majority.