NEW YORK, Sept. 21, 2021 /PRNewswire/ -- CrossingBridge Advisors, LLC ("CrossingBridge") an investment-management firm specializing in ultra-short and low-duration strategies, including special purpose acquisition companies (SPACs), today announced the launch of the CrossingBridge Pre-Merger SPAC ETF [NASDAQ: SPC].
Typically, SPACs are fully collateralized by U.S. government securities with a mandatory liquidation date within two years. SPC will purchase SPACs at or below collateral value with the intent of disposing of the shares prior to, or at the time of, a business combination. Consequently, CrossingBridge believes that a portfolio of pre-merger SPACs will provide investors with higher yields than other fixed-income products while significantly limiting downside risk.
"SPC is a renter, not an owner," said CrossingBridge's Founder and Portfolio Manager, David Sherman. "In other words, we aim to capture the fixed income nature of pre-merger SPACs purchased at a discount-to-collateral value with a potential equity pop from shareholders reacting favorably to an announced deal. But we are not interested in being an equity investor post-business combination – that is a whole different ballgame."
According to CrossingBridge, SPACs offer very similar characteristics to fixed income securities, which include:
SPACs have a liquidation date which is equivalent to a bond's maturity date.
SPAC common stock shareholders have a full-redemption right upon a business combination, similar to a change-of-control put provision found in corporate debt indentures.
SPACs are fully collateralized by U.S. government securities for the benefit of SPAC common stock shareholders to be released upon a redemption or liquidation. Hence, when an investor purchases SPAC common stock below its pro rata trust account value and holds the security to redemption or liquidation date, the investor will receive a positive yield, similar to a fixed income security's yield to maturity.
SPACs may have equity upside by participating in an attractive business combination. This upside is similar to a convertible bond with the added feature that SPAC investors may redeem their common shares for their collateral value rather than continue ownership post-transaction.
SPACs are not a new asset class for Sherman; he made his first SPAC investment over 15 years ago. Given the increased popularity and capital flowing into SPACs, Sherman has significantly increased the firm's exposure to SPACs during the past few years. CrossingBridge believes the market is now large and liquid enough to effectively manage SPAC-dedicated strategies.
"Our guiding principle has been, and will continue to be, that return of capital is more important than return on capital," emphasized Sherman.
For more information on CrossingBridge, please contact Andrew Flach at 973-769-3914 or [email protected]
About CrossingBridge Advisors Led by founder David Sherman, a high yield and opportunistic corporate credit veteran with more than 30 years of experience. CrossingBridge Advisors is an investment management firm specializing in ultra-short and low duration strategies, which includes special purpose acquisition companies (SPACs), as well as responsible corporate debt investing. Now with four funds, CrossingBridge offers a diverse array of fixed-income products to fit into various income portfolios and strategies. For more information, visit: www.crossingbridgefunds.com.
The fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company, and it may be obtained by calling 855-552-5863, or visiting www.crossingbridgefunds.com/spac-etf. Read it carefully before investing.
Investing involves risk; Principal loss is possible. 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.
Equities are generally perceived to have more financial risk than bonds in that bond holders have a claim on firm operations or assets that is senior to that of equity holders. In addition, stock prices are generally more volatile than bond prices. Investments in debt securities typically decrease in value when interest rates rise and this risk is usually greater for longer-term debt securities. Bonds are often owned by individuals interested in current income while stocks are generally owned by individuals seeking price appreciation with income a secondary concern. The tax treatment of returns of bonds and stocks also differs given differential tax treatment of income versus capital gain.
Duration is defined as the weighted average of the present value of the cash flows and is used as a measure of a bond price's response to changes in yield. Yield to Maturity (YTM) is the yield on the portfolio if all bonds are held to maturity; it is based on the stated maturity date or official call date. A change of control Put provision protect lenders in the event that the control of the borrower changes hands due to changes in share ownership or membership of the board. The change of control Put provision is a right bondholders have to oblige the company to immediately re-pay the bondholders their nominal amount invested.
CrossingBridge Advisors, LLC, is the advisor to the CrossingBridge Pre-Merger SPAC ETF which is distributed by Foreside Fund Services, LLC. CrossingBridge Advisors, LLC is not affiliated with Foreside Fund Services, LLC.