The Washington Post recently released an article entitled Investors are flocking to video gaming, but be wary of esports, SPACs, advisors say. In this article, Ellen Zavian has a chance to sit down and speak with some major financial advisors.
Josh Chapman is the Co-Founder and Managing Partner of Konvoy Ventures, a venture capital company that invests in infrastructure technology, tools, and platforms for the video game industry. He said investors are drawn to the gaming industry because of the success of the market during the pandemic combined with the allure of SPACs (Special Purpose Acquisition Companies created for the sole purpose of going public on the stock market).
Sean Branagan, the Chairman of Scrappy Capital, is not as confident in these SPACs. “SPACs tend to take companies before they have truly proven themselves, and in essence, they are competing against traditional investment firms that were waiting for these companies to mature through traditional funding rounds. With SPACs, this process is skipped, and the company goes public at an often-inflated valuation,” Branagan said. “We have learned from history that SPACs allow the initial investors to have an exit plan from the start, leaving the general public investors without the management expertise to bring the newly formed company to maturity.”
A Special Purpose Acquisition Company is an organization that does not perform commercial operations. Its sole goal is to strictly raise capital through an initial public offering (IPO).
(All information was provided by The Washington Post and Investopedia)
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