Glossary

Acquisition target The SPAC sponsor identifies a private company, or acquisition target, for the SPAC.
Barclays Capital U.S. 1-3 Year Government/Credit Bond Index This index includes all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds that have maturities of between 1 and 3 years and are publicly issued.
Basis Point A common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the percentage change in a financial instrument.
Blank check company SPACs are sometimes called “blank check companies,” because SPAC investors buy shares without knowing the private company that will be acquired.
Bloomberg Barclays Aggregate Bond Index The Bloomberg Barclays Aggregate Bond Index, or "Agg" (for aggregate), is a broad-based fixed-income index used by bond traders, mutual funds, and ETFs as a benchmark to measure their relative performance.
Business combination The SPAC sponsor announces an initial business combination after the acquisition target has been identified and due diligence has been performed.
Cash Flow The total amount of money being transferred into and out of a business, especially as affecting liquidity.
Carry For bonds, carry is the coupon on the bonds minus the interest costs of short-term borrowing. For equities, carry is the dividend yield minus the interest costs of short-term borrowing.
Consumer Price Index (CPI) The Consumer Price Index (CPI) examines the weighted average of prices of a select group of consumer goods and services, such as transportation, food, and medical care. The CPI is often used to identify periods of inflation or deflation.
Correlation Correlation is a statistical association that describes how two variables move in concert with each other. Positive correlation means the two variables move in the same direction. Negative correlation means the two variables move in opposite directions. Zero correlation means the two variables move independently to each other.
De-SPACing The process of “de-SPACing” occurs once the business combination has been finalized. The SPAC no longer exists.
Discount to Trust Pre-merger SPACs are required by prospectus to place the IPO proceeds into a Trust, which must be invested in T-Bills and/or Treasury Money Market Funds. The price below the Trust value at which shares of the pre-merger SPAC trade, is know as the discount-to-Trust value. Conversely, if the pre-merger SPAC shares are trading above the Trust value it is called the premium-to-Trust value.
Duration Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.
HFRX Absolute Return Index The HFRX Absolute Return Index is designed to be representative of the overall composition of the hedge fund universe.
Russell 2000 The Russell 2000 index measures the performance of the 2,000 smaller companies that are included in the Russell 3000 Index, which itself is made up of nearly all U.S. stocks.
SPAC A Special Purpose Acquisition Company, also known as a blank check company, is a company formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring (or merging with) one or more existing private companies.
S&P 500 S&P 500® Index: (registered trademark of The McGraw-Hill Companies, Inc.) is an unmanaged index of 500 common stocks primarily traded on the New York Stock Exchange, weighted by market capitalization. Index performance includes the reinvestment of dividends and capital gains.
SPAC units, shares & warrants SPAC units are offered at the time of the IPO. A unit consists of a share of common stock and a (portion of a) warrant. Beginning approximately 50 days after IPO, the common stock and warrants may be bought and sold separately.
Sponsor The management company that forms the SPAC and bears offering expenses is the sponsor. Sponsors commonly receive founders shares.
Trust account Cash raised by a SPAC is held in a trust account, and generally invested in relatively safe interest-bearing instruments, until a business is acquired, or the SPAC is liquidated without an acquisition and the money is returned to investors.
Warrant A warrant gives the holder the right to purchase a specific number of shares of common stock at a specific price during a specific period of time.
Yield to maturity (YTM) Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures.
Yield to Worst Yield to worst is a measure of the lowest possible yield that can be received on a bond with an early retirement provision.