The US Securities and Exchange Commission (SEC) has found the growing trend of celebrity-endorsed special purpose acquisition companies (SPACs) dangerous enough to warn investors in a new statement: just because a celebrity is participating in or endorsing a SPAC, doesn’t mean you should invest. For example, NBA Hall of Famer Shaquille O’Neal is a member of the Forest Road Acquisition Corp (NYSE: FRX) an entity assembled to provide a specialty finance platform across media, real estate, and renewable energy tax credit lending as well as film tax credit administration and tax credit brokerage opportunities.
The terminology can be complicated, but the SEC’s advice is fairly simple. Like if any stranger recommended you invest in a business (in this case, one trying to merge with other companies to take them public), there are a lot of unknowns that should be accounted for. “Celebrities, like anyone else, can be lured into participating in a risky investment,” writes the SEC’s Office of Investor Education and Advocacy. Celebrities, many already being wealthy and successful, “may be better able to sustain the risk of loss.”
SPACs aren’t going away, and in a culture where many wealthy celebrities are also wealthy investors, seeing past the glamour and bluster is necessary. “Even if a celebrity is involved in a SPAC, investing in one may not be a good idea for you. Before investing, always do your research,” writes the SEC.