A new ETF tracking the red-hot SPAC market is coming soon

Published Tue, Aug 4 20206:35 AM EDTUpdated Tue, Aug 4 20209:59 AM EDT

Here's how popular special purpose acquisition companies have become: There may soon be an exchange-traded fund tracking the SPAC market. The Defiance NextGen SPAC IPO ETF will be the first fund to mirror the performance of companies going public via merging with blank-check companies in the past 18 months, a new regulatory filing revealed. The underlying securities will be U.S.-listed and have a minimum market cap of $250 million. SPACs have become Wall Street's new buzz word as a record number of companies have turned to blank-check deals to go public with the traditional initial public offering market roiled by the coronavirus and heightened market volatility. There have been 51 SPAC offerings in 2020, raising a record $21.5 billion, up 145% from the same period a year ago, according to Goldman Sachs. A SPAC is a company formed to raise funds to finance a merger or acquisition within a certain time frame, typically two years. The target firm will be taken public through the acquisition. Earlier this year, Nikola and DraftKings have both gone public though the SPAC route. Meanwhile, Bill Ackman's Pershing Square Tontine Holdings raised $4 billion last month to become the largest SPAC in history. Ackman said he could be targeting "Mature Unicorns," those more developed privately financed companies valued at more than $1 billion. The new ETF will trade under the ticker SPAK. Defiance ETFs declined to comment beyond the filing. The expense ratio is not disclosed in the filing. A handful of ETFs on the market tracking the traditional IPOs have not gathered much investor interest this year. The Renaissance IPO ETF (IPO) gained just about $75 million of new money in 2020, despite rallying more than 40% this year. The First Trust US Equity Opportunities ETF (FPX) has had net outflows in 2020. "We find asset managers are eager to skate to where the puck is possibly going even if demand is not clear and SPAC has become the latest acronym in the financial world," Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, told CNBC. Goldman has issued a warning about the SPAC craze , urging clients to understand the deal structure before jumping in. The bank found that while the companies tend to get an initial pop after the deal announcement, they tend to underperform the broader market in the long run and the returns are all over the place. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

The Wall Street Bull (The Charging Bull) is seen during Covid-19 pandemic in New York, on May 26, 2020.

Tayfun Coskun | Anadolu Agency via Getty Images

Here's how popular special purpose acquisition companies have become: There may soon be an exchange-traded fund tracking the SPAC market.

The Defiance NextGen SPAC IPO ETF will be the first fund to mirror the performance of companies going public via merging with blank-check companies in the past 18 months, a new regulatory filing revealed. The underlying securities will be U.S.-listed and have a minimum market cap of $250 million.