SPAC up the truck?

“Crave Huge Risk, this investment may be for you” says a 2005 article by the New York Times. “A fools game” states another recent editorial regarding highly unknown and underappreciated investment vehicles known as SPAC’s, or Special Purpose Acquisition Corporations.

So little is known about these investments that many top tier hedge fund managers shy away from them due to their blatant uncertainty. Brokers and advisors regard them as merely tools of speculation, with one recent news article quoting a prominent broker stating “if this is your thing, just go to Vegas, your odds are the same and you’ll eat for free”.

Read more >>> Thoughts on Investing blog

Don't Get Whacked By India SPACs

MUMBAI - Global investors may want in on the India story, but market professionals here are voicing concerns over a rising number of speculators in the U.S. and U.K. who are raising funds through specialized investment vehicles without strong business plans for how to make use of the money in India.

Special-purpose acquisition companies, or SPACs, are essentially blank-check entities with no operations — they go public with the promise to investors that they will use the money they've raised to acquire or merge with another company.

There are an estimated 10 India-dedicated SPACs listed mainly in the U.S. and U.K. that have raised funds ranging between $350 million and $500 million to acquire companies here.

“Is India going to get whacked by SPACs? Piggybacking on the red-hot M&A wave that India is currently riding on, I believe it’s only a matter of time,” HDFC Bank Chairman Deepak Parekh said at a conference this week. M&A volume so far in 2007 has already hit an annual record of $50 billion; Parekh believes the total will surpass $100 billion by the end of the year.

Read More >>> Forbes.com article

Triplecrown files for SPAC, Chairman's past raises questions

Triplecrown Acquisition Corp. has filed to come public as a 'blank check' or SPAC (Special Purpose Acquisition Company). Triplecrown is a newly organized blank check company formed for the purpose of acquiring one or more operating businesses in the financial services industry.

The company is selling 40,000,000 units in a deal valued at $400 million, or $10.00 per unit. Each unit will represent one share and one warrant, and underwriters have been allocated a 6 million shares over-allotment. Citigroup is listed as the lead underwriter, with Jefferies, Ladenburg Thalman, and Broadband Capital Management involved in the deal.

Read more >>> 24/7 Wall St.

HDFC head cautions against acquisition firms

HDFC Chairman Deepakh Parekh today cautioned investors against the increasing trend of setting up Special Purpose Acquisition Companies (SPACs) for raising funds on the AIM.

SPACs are essentially firms that raise money through public offerings with an objective to acquire small- and medium-sized firms focusing on a particular sector or country. The acquisitions are made within a specified timeframe or the funds are returned to the investors.

Parekh, also the chairman of the CII National Council for Infrastructure Development, was speaking at a seminar on "London Listing - Special Emphasis on AIM."

"Conventional investment wisdom or perhaps even a pea-sized brain would tell us that you do not hand over millions of dollars to a group of a publicly listed company that does nothing, has no firm business strategy and may never have any assets. Yet the impressive returns of 40 per cent is reason enough for investors to savour SPACs," he said.

He added that there were close to 10 India dedicated SPACs, that have raised funds ranging between $350 million to $500 million and were now on the prowl to acquire Indian companies. There was already an AIM-listed India dedicated SPAC, which recently made an acquisition for $110 million.

"Clearly, this is just the beginning of sophisticated investment vehicles, but investors must also realise that the India party with extraordinarily high returns cannot go on forever," he said.

"At the same time, we must caution against reaching a pump and dump kind of situation which can undo all the good investor sentiment that has so painstakingly been built up in India." Parekh also questioned the Securities and Exchanges Board of India's (Sebi) restrictive regulations.
Read more >>> Business Standard (India)

See also >>> SPACs making their way to India and SPACs on prowl to acquire Indian firms and SPAC attacks on firms rising

China SPAC seeks amendments, extension

Chardan North China Acquisition Corp. Sets Meeting and Record Dates for Special Meeting of Stockholders; Calls for Extension of Date to Complete Business Combination

Company Still Working Toward Completing Acquisition by August 2007

SAN DIEGO & BEIJING--(BUSINESS WIRE)--Chardan North China Acquisition Corp. (OTCBB: CNCA, CNCAU, CNCAW) ("Chardan North" or “the Company”), a SPAC® incorporated in March 2005 for the purpose of acquiring an operating entity in the PRC, announced today that its Board of Directors has set August 7, 2007 as the date for its Special Meeting of Stockholders to consider and approve amendments to its certificate of incorporation to:

i)  eliminate the provision that purports to prohibit amending its
    "business combination" provisions;

ii)  extend the date before which Chardan North must complete a
     business combination ("Extension Amendment"), to avoid being
     required to liquidate, beyond August 10, 2007 to November 10,
     2007; and

iii) allow holders of up to 20% of the shares issued in Chardan
     North's IPO who vote against the Extension Amendment and elect
     conversion to convert their shares into cash held in the IPO
     trust account.

Read more >>> View CNCA 07-10-07 PR

Motley Fool talking SPACs: The Incredible Bulk

By Toby Shute - July 9, 2007

Speaking of margin of safety, I've stolen my dry bulk shipper idea from the guy who wrote the book on the subject. In case you don't have the $1,450 to shell out on a used copy of Seth Klarman's Margin of Safety on Amazon.com (Nasdaq: AMZN), there are extensive notes presented here. Klarman runs a hedge fund called the Baupost Group, and I enjoy checking out his top holdings from time to time. The guy has turned in some world-beating results, even while reportedly maintaining massive cash balances, so his positions are always worth a peek.

I was initially surprised to discover Star Maritime Acquisition (AMEX: SEA) among the firm's largest reported holdings -- first, because I'd never heard of it, and second, because once I looked it up, I discovered that it's a blank-check company. Fellow Fool Emil Lee explained both the how's and why's of investing in these vehicles, also known as SPACs (special purpose acquisition company). I think the key phrase from those articles is "heads I win, tails I get my money back with interest." A SPAC either finds an acquisition target by a set date, or it liquidates and returns the capital to shareholders.

Read more >>> TMF "The Incredible Bulk"

See also >>> TMF Return of the SPAC: Part 1 and TMF Return of the SPAC: Part 2

Paramount announces updated Chem Rx investor presentation

July 02, 2007: 08:55 AM EST

NEW YORK, July 2 /PRNewswire-FirstCall/ -- Paramount Acquisition Corp., a special purpose acquisition corporation ("SPAC"), announced today the release of an updated Chem Rx corporate presentation. The presentation includes a corporate overview and pro forma estimates and valuation pertaining to its proposed acquisition of Chem Rx, a major privately-owned long-term care pharmacy based in Long Beach, New York.

The presentation is available in the Investor Relations section of Chem Rx's website at http://www.chemrx.net. The presentation may also be found as an exhibit to Paramount Acquisition Corp.'s Current Report on Form 8-K, which is being filed today, on the SEC's website at http://www.sec.gov.

Read more >>> Paramount press release