Spacs prove resilient in shaky markets
Appetite for Special Purpose Acquisition Companies is growing as investors find comfort in their new structure. Market participants expect more to come this year along thematic lines, with the first ESG Spac launched in May.
Special Purpose Acquisition Companies (Spacs), which use the IPO market to raise funds for acquisitions, have proven their ability to weather the current market turbulence.
As of May 21, 26 such IPOs had come to market in the US this year – indicating that 2020’s Spac IPO volume could well match, if not beat, that of 2019.
It is a good result for Spacs, which, in a previous incarnation, had fared poorly during the 2008 financial crisis.
“So far, everything we’ve hoped for has proved out, in that they have been very resilient in the market dislocation,” says Alysa Craig, managing director at Stifel in the M&A group and head of the firm’s Spac practice. “In [early May] in particular there has been a lot of activity.”
In part, she says, that is because of the hybrid nature of Spacs: “While the IPO market has taken a pause, the M&A market has not really stopped during this crisis.