Abnormal returns from insider trades on special purpose acquisition company’s (SPAC’s) warrants

Abstract

This Master Research Paper explores the disgraceful impact in the finance industry, and the lucrative returns from the Special Purpose Acquisition Company (SPAC) warrants with insider and trader trades (information). <br>A SPAC, also known as “blank check company”, is an innovative publicly-traded investment vehicle which began in 1993 for companies to raise funds via an initial public offering (IPO) to complete a targeted acquisition. An event study methodology was conducted to provide a systematic review of the pre-announcement and post-announcement of price and volume movement on SPAC warrants from different industries. A sample size of 11 events was utilized.<br> This study finds that the insider traders causes abnormal movement on warrant price and volumes trades over the event period (between trading day -5 to trading day 30) on those SPAC warrant before any positive announcement from the SPAC companies.