SPACs

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  • #118092

    Joselin
    Participant

    Special Purpose Acquisition Companies (“SPACs”) have been the rage of late, though SPACs themselves as a vehicle are not new. Does anyone think this trend of raising capital/SPAC mergers will be the way forward, becoming a somewhat sustainable avenue of M&A activity, or will it just be yet another M&A wave that comes and goes?

    #118391


    Participant

    Not sure how long the SPAC trend will last; slightly different type of merger though I feel, essentially a vehicle with an operating company, many of the post-merger integration issues should not be applicable?

    #118414


    Participant

    My understanding of SPAC is more so to raise capital and to ‘go public’ without an IPO. So it shortcuts that long process. I agree with participant above in his assessment.

    #118419

    Linda Castle
    Participant

    I think SPACS are interesting. Virgin Atlantic created a SPAC to buy genetics company 23andMe. It seems like a vehicle for the rich investors to buy a company and make even more money from owning a majority stake in them in the public market.

    #118613


    Participant

    I believe this is a phenomenon of 2020’s cheap liquidity and capital hunting for yield. In a SPAC, the timeframe before the deSPAC happens earns and interest and early investors in the SPAC also receive warrants which are basically free equity options on the subsequently merger. It almost becomes risk free if you are backing a relatively well known team (of course share price will fluctuate before deSPAC and that it that risk).

    Whether this will continue, will depend on whether we have any market incidents where SPACs acquired bad assets or share price performs poorly after deSPAC. Case in point is Nikola which is an electric truck company. So far that one scandal has not led to a loss of interest in SPACs yet. But I believe it is a matter of time since there are more than 200 listed last year, there surely will be dud assets or some market accident at some point. Some SPAC teams are not even professional investors (sport stars, celebrities etc)

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