The Tesla Effect and the Mispricing of Special Purpose Acquisition Companies (SPACs)

11 Pages Posted: 9 Mar 2021

See all articles by Kanis Saengchote

Kanis Saengchote

Department of Banking and Finance, Chulalongkorn Business School

Date Written: March 9, 2021

Abstract

Special purpose acquisition companies (SPACs) are publicly traded companies that raise funds through an initial public offering (IPO) for future acquisition. Because they are pools of capital with known value to be deployed, their exchange value is already predetermined prior to merger. However, many SPACs in 2020 trade at prices far above the $10 value, which can be interpreted as mispricing. Many mispriced SPACs are linked to electric vehicle-related businesses, which may be attributable to the “Tesla effect” that can represent behavioral bias, raising concern whether investors fully understand this novel investment opportunity.

Keywords: behavioral finance, mispricing, Tesla effect, SPACs

JEL Classification: G1

Suggested Citation

Saengchote, Kanis, The Tesla Effect and the Mispricing of Special Purpose Acquisition Companies (SPACs) (March 9, 2021). Available at SSRN: https://ssrn.com/abstract=3800323 or http://dx.doi.org/10.2139/ssrn.3800323

Kanis Saengchote (Contact Author)

Department of Banking and Finance, Chulalongkorn Business School ( email )

Bangkok, 10330
Thailand

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
812
Abstract Views
2,537
rank
41,799
PlumX Metrics