SPAC Space

In 2020, over half of all initial public offerings (IPOs) in the United States were special purpose acquisition companies (SPACs), blank-check companies that typically had two years to find a business to take public, usually through a reverse merger. Together, 248 SPACs raised over $83 billion, 46% of the total US IPO proceeds in 2020. The SPAC boom accelerated in 2021. By the end of March 2021, there were 298 SPAC IPOs year-to-date, raising $96.6 billion. At the time, SPAC sponsors were eagerly seeking out opportunities in sectors such as fintech, healthtech, renewable energy, and electric vehicles to invest the $136 billion they had at their disposal. Moreover, there was another $66.4 billion in SPAC IPOs in the pipeline. The opportunities for SPAC sponsors were attractive, as much as a ten-times return on their investment, but SPAC investors had also made some spectacular returns. For instance, Luminar Technologies, a leading producer of sensor technology for autonomous vehicles, entered into a definitive agreement with a SPAC in August 2020, for a post money valuation of $3.4 billion. At the end of March 2021, it was valued at $8.3 billion, down from a day-end high of $13.5 billion, but still up 135% on flotation. Proponents of SPACs touted a more efficient and streamlined path to public markets compared to the traditional IPO process - a type of "regulatory arbitrage." There was also the benefit of giving retail investors opportunities that would be otherwise reserved for private equity and institutional investors. Yet many industry observers were skeptical of the SPAC boom, noting the misalignment between sponsor and shareholder interests, the opacity of the process, and the poor historic returns of the entire asset class. They believed that the SPAC boom would soon end.

• IPOs
• Investment management
• Mergers and acquisitions
• Strategy