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Defiance ETFs launches the first SPAC ETF

Paul Dellaquila, President of Defiance ETFs, joined The Final Round to discuss the company's newly launched ETF that focuses on SPACs and how to invest and evaluate the SPAC market.

Video Transcript

JEN ROGERS: If you've been paying attention to the markets in 2020, you know that SPACs have been a big craze, like Bitcoin and cannabis before them. But maybe there's something real here. Let's get to it. I want to bring in Paul Dellaquila He is the president of Defiance ETFs, and they have announced the launch of Defiance Next Gen SPAC Derived ETF. So Paul, I imagine you're going to want to take some umbrage with how I introduced this, cannabis and Bitcoin. I mean, you're putting out a SPAC ETF. Are you convinced that SPACs aren't just like a flash in the pan?

PAUL DELLAQUILA: So first off, thank you for having me on your program and allowing me the opportunity to talk about it. And clearly, 2020 has been the big year of insurance. You're almost at $40 billion in SPACs. It's never been seen before. But I do think, SPACs have been around for a while. So one of the companies that everybody knows that probably doesn't know that it came from a SPAC, was Burger King back in 2012. So they have been around for some time.

And to answer your question, yes, I think this trend is going to continue. I think ultimately, as bigger investors, like a Bill Ackman, he's the 800-pound gorilla, if you will, the $4 billion pound gorilla, that bring substantial assets to these pre-IPO stocks SPACs, that's going to be very enticing for private companies. And we're seeing more established, more credit investors step into the arena. So I think it's going to be a trend that continues. And there's some benefits as to why that is for companies. There's some benefits to investors as why they're interested in investing in SPACs as well I think.

DAN ROBERTS: Paul, Dan Roberts here. Let's talk more about those benefits industry specific, because as you mentioned, I mean, Bill Ackman has a SPAC. Now there are reports SoftBank doing a SPAC. Now in the sports world, I follow sports business for us, and checks involved in a SPAC. Now there are reports that Fenway Sports Group, which owns the Red Sox, is looking at selling to a SPAC, the RedBall SPAC, from the guys at Red Bird Partners, who just partnered with Dwayne "The Rock" Johnson to buy the XFL.

So suddenly you're seeing the SPAC trend hit the sports world. And I'm just wondering, I mean, it went from tech, we saw Nikola, we saw Virgin Galactic, now to sports. Is there any industry for which the SPAC wouldn't be appealing? Or do you think there's any type of business for which going public via SPAC is particularly attractive?

PAUL DELLAQUILA: Sure. And one of the other big sports related is DraftKings, obviously, fantasy sports, sports online gambling that has also chosen to go the SPAC route. I think that's one of the attractive things, particularly for our ETF. It is sort of sector agnostic. It's going to not really be specialized in any one area. And it's going to open up the opportunities for these types of conversation to happen.

I think what you're seeing, though, is that a lot of these SPACs are specialized in a certain area. The one you mentioned, Billy Beane, he heads it up, former or still with the Oakland Athletics, but could be former if this deal goes through. They are specialized in the sports arena. Bill Ackman's a little bit different. He's kind of opened up where it's going to be a little bit more broad as far as the opportunity that he's seeking. But a lot of these other SPACs are more energy-specific or more health care-specific. So you are seeing investors bring their expertise to a certain sector. But our ETF, the stock market in general tends to be very broad.

SEANA SMITH: Hey, Paul, it's Seana. I have a two-part question. One, your ETF has now been trading for two weeks. So what's the interest been like from investors? And then two, there are a lot of SPACs that have been very successful, but it is a risky investment. So just how is your ETF hedging your exposure to some of those risky and potentially problematic SPACs?

PAUL DELLAQUILA: Yeah, thank you for the question. So we launched this, actually two weeks old tomorrow, as a matter of fact, two weeks since launch. We've seen $25 million, almost $25 million in assets come into the ETF thus far. We only seeded with $2.5 million. The first day of trading, we traded 600,000 shares, and it's been very consistent since then. So we're extremely happy with the interest that we've received. And that's from retail investors. But more importantly, we've spoken with a lot of RAs, a lot of financial advisors who are interested in this space as well. So we see it going upstream to them also.

And as far as the second part of your question, we do have certain screens on the SPAC. So for instance, liquidity tends to be an issue with some of these SPACs, so we're focused on some of the larger, some of the most liquid SPACs out there. So for instance, SPAC has to trade for 90 days before we allow it in there, so it passes our liquidity screens. So that's one of the risk factors we're able to take off the table for investors.

The other part of that is, we believe and our belief is, that the bigger SPACs that have the bigger dollars are going to be more enticing with the investors that have the expertise to bring to the table for these companies, that are going to be moving from the private world to the public world. So we're focused on that as well. So that's really the two-pronged approach we're using to ensure that we have some of the most liquid and biggest as far as AUM SPACs in the ETF.

JEN ROGERS: Paul Dellaquila, interesting news. Probably have you back again to hear how this goes. As Seana said, only two weeks here, but a lot of demand. He's the president of Defiance ETFs.

PAUL DELLAQUILA: Thank you very much for having me on.