SPXZ - A Public Proxy For Late Stage VC Investing
Investing in innovation has long been a constant driver of excess returns, through both bull and bear markets, economic expansions and recessions. The traditional way to invest in innovation is through private equity and venture capital, though historically only the wealthiest of investors have been able to access these opportunities.
SPACs have emerged as a viable alternative to late-stage private financing for the most innovative companies, in the process giving public market investors earlier access to an important segment of the investment universe. With that said, we believe SPACs are not well-suited to passive investing, as they have an inherent “sponsor bias” that has historically caused a large and relatively predictable performance differential between the top and bottom quartile of deals.
Our white paper explains why we believe SPACs are a good public proxy for late-stage venture capital investments, and why we believe our ETF SPXZ may be a valuable building block in any investor’s portfolio for gaining exposure to innovative companies of the future.
Read the white paper here.
SPXZ - Seek to Own the Companies of the Future
Carefully consider the Fund's investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund's prospectus and summary prospectus, which may be obtained by calling (855) 857-2677. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Past performance is no guarantee of future results.
The Fund invests in equity securities and warrants of SPACs. Pre-combination SPACs have no operating history or ongoing business other than seeking Combinations, and the value of their securities is particularly dependent on the ability of the entity's management to identify and complete a profitable Combination. There is no guarantee that the SPACs in which the Fund invests will complete a Combination or that any Combination that is completed will be profitable. Unless and until a Combination is completed, a SPAC generally invests its assets in U.S. government securities, money market securities, and cash. Public stockholders of SPACs may not be afforded a meaningful opportunity to vote on a proposed initial Combination because certain stockholders, including stockholders affiliated with the management of the SPAC, may have sufficient voting power, and a financial incentive, to approve such a transaction without support from public stockholders. As a result, a SPAC may complete a Combination even though a majority of its public stockholders do not support such a Combination. Some SPACs may pursue Combinations only within certain industries or regions, which may increase the volatility of their prices.
The Fund invests in companies resulting from a combination of a SPAC and a [privately held] operating company. These companies may be unseasoned and lack a trading history, a track record of reporting to investors, and widely available research coverage. Post-Combination SPACs are thus often subject to extreme price volatility and speculative trading. These stocks may have above-average price appreciation in connection with a potential Combination with a Post-Combination SPAC prior to inclusion in the portfolio. The price of stocks included in the portfolio may not continue to appreciate and the performance of these stocks may not replicate the performance exhibited in the past. Post-Combination SPACs may share similar illiquidity risks of private equity and venture capital. The free float shares held by the public in a Post-Combination SPAC are typically a small percentage of the market capitalization. The ownership of many Post-Combination SPACs often includes large holdings by venture capital and private equity investors who seek to sell their shares in the public market in the months following a Combination transaction when shares restricted by lock-up are released, causing greater volatility and possible downward pressure during the time that locked-up shares are released.
Because the Fund is “non-diversified,” it may invest a greater percentage of its assets in the securities of a single issuer or a lesser number of issuers than if it was a diversified fund. As a result, a decline in the value of an investment in a single issuer or a small number of issuers could cause the Fund's overall value to decline to a great degree than if the Fund held a more diversified portfolio. The fund is new and has a limited operating history.
Markets have experienced significant periods of volatility in recent years due to a number of economic, political and global macro factors, including the impact of the coronavirus (COVID-19) pandemic and related public health issues. As a result, the risk environment remains elevated.
“Pre-Combination” SPACs are SPACs that are either seeking a target for a Combination or have not yet completed a Combination with an identified target
“Post-Combination” SPACs are operating companies that have completed a Combination with a SPAC within the last three calendar years.
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.
The Morgan Creek - Exos SPAC Originated ETF (SPXZ) is advised by Morgan Creek Capital Management, LLC, sub-advised by Exos Asset Management, LLC, and distributed by Foreside Fund Services, LLC.