Beware of celebrities hyping SPACs.
That’s the message from the Securities and Exchange Commission, which warned investors Wednesday about buying shares of special purpose acquisition companies based on endorsements from Hollywood actors, professional athletes and famous musicians.
The SEC highlighted that the red-hot listings, which have captured the attention of Wall Street and retail investors, can pose substantially more risks than typical initial public offerings.
“It is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it or says it is a good investment,” the agency said in a statement.
The SEC’s caution flag about SPACs is similar to a warning it issued in 2017 about initial coin offerings when Bitcoin and other cryptocurrencies were soaring.
The agency said at the time that investors should be wary of investing in ICOs based on celebrity pitches. The regulator later brought enforcement actions against popular icons such as boxer Floyd Mayweather and rapper DJ Khaled for not disclosing they were being paid for the endorsements.
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As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.