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relates to Lucrative SPAC Trades Spur Insider-Trading Probe

Illustration: Chris Nosenzo

The Big Take

Lucrative SPAC Trades Spur Insider-Trading Probe

Before many blank-check company merger announcements, there was a curious spike in warrant trading.

A pattern of prescient and potentially very lucrative trading has taken shape on a once-obscure corner of Wall Street—and U.S. investigators are suspicious.

The setting is the world of special-purpose acquisition companies, or SPACs, the shell corporations that have flooded onto markets in recent years to raise money from investors and then hunt for companies to buy. The instrument is a stock warrant, which gives holders the right to buy shares at a specified price in the future. SPACs happen to issue a lot of warrants.