$20
50
$0
0
2013 2014
2015 2016
2017
2018
2019 2020*
* Through September
Average IPO Size Average SPAC Size
$400
SIZE OF AVERAGE IPO VS. SPAC
$300
$200
$100
$0
2012
2013
2014
2015 2016
Source: SPACInsider, Dealogic 2017 2020 2018 2019
look at the investment... and if you don’t like it, you get your money back. Nothing else like this exists in any other public market. SPACs are growing in popularity because they’re an attractive alternative to IPOs or direct listings for a number of reasons. That’s why over the past several months alone, we’ve seen well-known private companies going public via SPAC. In fact, since 2012, the SPAC market has grown from 1% of all dollars raised in U.S. IPOs to nearly half this year, according to Dealogic. Over that period, the average SPAC has risen more than seven-fold in size, while the average IPO has shrunk by almost 25% (See above chart). Participating in a SPAC comes with several benefits for all of the involved parties – the sponsors, companies, and investors. Let’s take a look at each...
WHY SPONSORS LIKE SPACS
They’re quicker
27%
Compared with taking an operating company public via an IPO, which involves going through years of financial results, SPACs have none. SPACs are going to buy something, but at the outset they don’t own anything. This means the process takes weeks rather than months. (I laughed when I saw tech writer Byrne Hobart call them “the Vegas wedding chapel of liquidity events.”) They’re more flexible While the sponsors will lay out some initial guidelines, they have broad flexibility in the business in which they will ultimately invest. This allows them to be opportunistic and take advantage of changes in the market or the opportunity. They’re lucrative The sponsors aren’t doing this for free. When 17% 4% 7% 8% 11% 12% 15%
No Focus Energy Entertainment ther/Various Other Tech Finance/FinTech Industrial Health Care
Source: Harvard Law School
64
June 2021
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