Spacs under attack (again)
It’s a new year, but Spacs are still facing the same old debates – with a few new twists.
There’s nothing like a little regulatory spat to kick off a new year. And for 2021 the target is, not for the first time, special purpose acquisition companies (Spacs), the blank cheque vehicles that soared in popularity last year with record IPO fundraisings as well as a host of de-Spac merger deals.
That Spac volumes should have surged in the pandemic year of 2020 was little surprise. Volatile market conditions meant that companies looking to go public were increasingly receptive to alternatives to the traditional initial public offering (IPO). And an assumption that this appetite would continue through the next 18 months or so helped to drive record volumes of new Spac formations.
This combined with another big driver – the ever-increasing number of firms with highly speculative but very ‘of-the-moment’ business models. The electric vehicle sector, for instance, has attracted much interest from Spacs.
Volatile market conditions meant that companies looking to go public were increasingly receptive to alternatives to the traditional initial public offering
But they are not to everyone’s taste. For all the talk that traditional equity investors are increasingly getting involved at the IPO stage of a Spac, the bulk are not.