ETF TV News #75 Matthew Tuttle discusses the SPAC market and De-SPAC ETF

Presented by Syntax Advisers.

Dan Barnes: Welcome to ETF TV News – your weekly insights for investors on listings and use in the exchange traded funds industry. I’m Dan Barnes. Joining me this week is Matthew Tuttle, CEO and Chief Investment Officer at Tuttle Capital Management, and Deborah Fuhr, managing partner at ETFGI. Guys, welcome to the show.

Deborah Fuhr: Great to be here.

Matthew Tuttle: Thank you for having me.

Deborah Fuhr: So we’ve seen that the SPAC market has been really hot in 2021. In the first five months of the year there’s been more SPACs coming to market, more money raised than last year and in each of the individual past years, so it’s a pretty interesting space.

Dan Barnes: Absolutely. Matthew, what’s your assessment of the state of the current SPAC market?

Matthew Tuttle: Unfortunately, it’s cooled down a lot and a lot of that was because the SEC wanted to kind of wrap their heads around it a little bit better. They put in some speed bumps with some rules around warrants and that has really slowed the issuance of new SPACs. You’ve also had high profile SPAC mergers that didn’t go as well as maybe people would have hoped. So that’s slowed the market down a lot, but I think it’ll certainly start to pick up again once we get through this little SEC speed bump.

Deborah Fuhr: Last week, you listed two new ETFs, one of them I’m kind of curious about, so what is a De-SPAC ETF?

Matthew Tuttle: Right. So a De-SPAC is a company that came public through a SPAC merger. So we created an index called the De-SPAC Index. It’s 25 of the largest companies that have come up through SPAC mergers, and we keep it fresh by making sure that it only looks back a year. Then we launched two ETFs off of that index. One is long with the companies that are in the index and the other one is short with the companies that are in the index.

Deborah Fuhr: And how often do you reconstitute that index and the ETF?

Matthew Tuttle: So the index and the ETFs rebalance on a monthly basis. Again, we want to keep it as fresh as possible.

Deborah Fuhr: And what type of investors do you think will be using these products and how will they use them?

Matthew Tuttle: From the long side, these are all companies that are not in any Russell indices, so there are two things there. Number one, if you’re an index investor, you’re not getting exposure to these companies. And number two, eventually they might get added to a Russell index, and then, boom, that’s going to be like rocket fuel for these names.

On the short side, there really is no way to go short with these companies, effectively. It’s hard to do, so we put it together in a package. And these are companies that move, so you know, I think the index is down something over 30% year to date. These are companies that people want to get short exposure to. So we see this appeal to more hedge funds, family offices, real active traders using the short side.

Deborah Fuhr: One of the reasons many thought sparks were hot earlier this year and kind of at the end of last year was due to the fact of COVID-19 and people not being at roadshows. What is your outlook for the end of 2021?

Matthew Tuttle: We’re bullish on the area, we think that the pre-merger SPACS have bottomed out. We think the SEC is going to wrap their heads around it, people are going to be issuing these. There’s going to be a demand for it, because it democratizes the IPO process for individual investors, and it adds another uncorrelated asset class, so we don’t think they’re going anywhere. Really, at the end of the day, the SPAC market just needs a win. It needs a merger to go through and for the stock price to go up to start getting people’s interest again. And that’ll happen.

Deborah Fuhr: That’s great. Thank you so much for joining us.

Matthew Tuttle: Thank you for having me.

Dan Barnes: Deborah, can you give us an update on the newly issued exchange traded funds over the previous week?

Deborah Fuhr: Last week there were 23 new ETFs launched. There were 16 cross-listings. 17 issuers brought products to market listed on 12 exchanges. One of them was on digital assets. And I do think it’s important not to call them crypto currencies, because what came to market was a product that’s tracking Cardano, which is actually a block chain platform and not a crypto asset, so I think calling everything crypto assets can be confusing to people – it implies something that it’s not, actually. Three were fixed income, 19 were equity. We had five active products. We had the first LGBTQ ETF come to market where they’ve created an index that’s based on companies that the LGBT community feels is positive towards them and resonates, and the performance for that index has actually been quite good. Again, more ESG and I would put that into the ESG bucket, so I think the thematic ESG is still a continuing trend that we see coming to market. Then also WisdomTree did two core ETFs last week.

Dan Barnes: That’s really good to hear, Debbie. It’s great to see that ESG is being picked up both by new issuers and of course, the investors as well. Thank you very much.

Deborah Fuhr: Thank you.

Dan Barnes: Thank you to our sponsor, Syntax Advisers, Matthew Tuttle, and Deborah Fuhr, and of course, you for watching. To catch up on of our episodes and to catch up on new ETF TV news, go to ETFTV.NET.

*ETF TV News does not provide investment advice nor recommend products.

Published on May 25, 2021