Special Purpose Acquisition Companies (SPACs) have taken the market by storm in 2020 and 2021, accounting for more than half of all IPO proceeds raised in US equity markets during the period. In this session, I start with a look at blank check companies, their predecessors in the 1980s, and how SEC restrictions on those companies gave rise to the current SPAC structure. I compare SPACs to bankerled IPOs and direct listing, assessing the pluses and minuses, and argue that there rise can be attributed to four factors: low interest rates, a booming stock market that has become a pricing game, and celebritycentered investing. Finally, I look at the question of the winners and losers from SPACs, by looking at the research on existing SPACS, with sponsors as the only clear winners. I argue that rather than inveigh against SPACs, we should be pushing for changes in their structure, with reductions on sponsor subsidy and better alignment of sponsor and investor interests at the top of the list.
Blog Post: https://aswathdamodaran.blogspot.com/...
Research papers:
1. A Sober Look at SPACs, 2020, Klaussner, Ohrlrogge and Ryan: https://papers.ssrn.com/sol3/papers.c...
2. SPACs, 2021, Gahng, Ritter and Zhang: https://papers.ssrn.com/sol3/papers.c...