Bill Ackman’s (pictured above) Pershing Square Tontine Holdings Ltd, raised $4 billion in its IPO last month – the largest ever for a blank-check company.

With the ongoing boom in IPOs of SPACs (Special Purpose Acquisition Companies), or blank check companies, could an ETF be far behind?

SPACs are invaluable vehicles for private companies to go public without all the hassles of a formal IPO. The private company, or a VC-funded startup, could instead simply merge with a listed SPAC. Ackman, who is CEO of PSTH (NYSE: PSTH.U), is looking to merge with private, large capitalization, high-quality, VC-funded growth companies, often referred to as “mature unicorns.”

SPACs have raised over $22.5 billion through 55 offerings in 2020 so far, according to Markets Insider. In contrast, last year, these vehicles raised just $13.6 billion.

Investors looking to check in to the hot new trend could soon have an ETF dedicated to blank check companies.

The Defiance NextGen SPAC IPO ETF

This new ETF, which filed with the SEC last Friday, will track shares of companies that have gone public via a SPAC merger rather than a regular IPO.

The ETF will be passively managed and trade under the ticker SPAK. It will track the Indxx SPAC & NextGen IPO Index.

At least 80% of the ETF’s assets will be invested in SPAC-derived IPO offerings over the previous 18 months.

Some of 2019’s SPAC IPOs have delivered rich returns. Virgin Galactic Holdings Inc (NYSE: SPCE) and Draftkings Inc (NASDAQ: DKNG) have risen 116% and 82% respectively since their listings, according to Bloomberg.

Again, EV maker Nikola (NASDAQ: NKLA) made its debut via an acquisition by VectorIQ Acquisition, a blank check company (SPAC) on June 4. The stock opened at $37.55 that day. It touched a high of $93.99 subsequently, though it currently trades at $38.84.

The balance of 20% of the ETF would be invested in IPO companies.

The selected companies must be U.S.-listed, have a minimum total market capitalization of $250 million, have a free float (i.e., the proportion of publicly available shares) of at least 10%; and have a trading price of less than $10,000.

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