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SUMMARY:Harnessing the Overconfidence of the Crowd: A Theory of SPACs - Ma
 rtin Szydlowski (Carlson School of Management)
DTSTART:20211125T130000Z
DTEND:20211125T140000Z
UID:TALK161932@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:We provide a theory of Special Purpose Acquisition Companies\,
  or SPACs. A sponsor raises financing for a new opportunity from a group o
 f investors with differing ability to process information. We show that wh
 en all investors are rational\, the sponsor prefers to issue straight equi
 ty. However\, when sufficiently many investors are overconfident about the
 ir ability to process information\, the sponsor prefers to\nissue units wi
 th redeemable shares and rights. The model matches many empirical features
 \, including the difference in returns for short-term and long-term invest
 ors and the overall underperformance of SPACs. We also evaluate the impact
  of policy interventions\, such as greater mandatory disclosure and transp
 arency\, limiting investor\naccess\, and restricting the rights offered.
LOCATION:Online
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