by Tyler Durden
Friday, Apr 09, 2021 - 11:01 AM
As we noted earlier this week, it appears the days of SPACs debuting a dozen at a time, what many had speculated might be the peak of SPAC-mania, are over. Only a handful of new deals hit public markets this week.
On Friday morning, the FT reported that one reason for the slowdown appears to be a declining appetite for institutional financing from institutional investors like Fidelity and Wellington Management, which have poured billions of dollars into so-called PIPE vehicles, a critical aspect of SPAC dealmaking.
SPACs raise money from public markets during their debut, but getting a deal done typically requires an infusion of private capital, often from a variety of sources.
[co-author: Antony Vitanov]
Special Purpose Acquisition Companies, commonly known as ‘SPACs’ or ‘blank check companies’, have recently seen a huge uplift in investor appetite with little sign of this trend abating any time soon. Understandably, SPACs are gathering increased interest from regulators around the world as the current hotbed for the SPAC market, the U.S., continues to make headlines with record levels of capital raised. In contrast, the UK market has not seen anywhere near the same level of SPAC activity. However, with a recent push to update the UK Listing Rules, that may soon change. Following swiftly on from the Lord Hill Review’s recommendations (you can read our summary of the key recommendations
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SPACs, IPOs And Liability Risk Under The Securities Laws: John Coates, SEC, Acting Director, Division Of Corporation Finance, April 8, 2021 Date
08/04/2021
Over the past six months, the U.S. securities markets have seen an unprecedented surge in the use and popularity of Special Purpose Acquisition Companies (or SPACs).[1],[2] Shareholder advocates – as well as business journalists and legal and banking practitioners, and even SPAC enthusiasts themselves[3] – are sounding alarms about the surge. Concerns include risks from fees, conflicts, and sponsor compensation, from celebrity sponsorship and the potential for retail participation drawn by baseless hype, and the sheer amount of capital pouring into the SPACs, each of which is designed to hunt for a private target to take public.[4] With the unprecedented surge has come unprecedented scrutiny, and new issues with both standard and innovative SPAC structures keep surfacing.
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One of the hottest going-public trends in 2020 and 2021 has been the rise of SPACs – Special Purpose Acquisition Companies – as a vehicle for private companies to go public. SPACs are shell companies that are formed, funded and taken public for the purpose of later acquiring an operating company. By merging with a SPAC, the private company effects a reverse takeover, inheriting the SPAC’s existing cash and taking over its management. SPAC mergers have quickly increased from being occasional to outpacing the number of traditional IPOs.
A SPAC merger involves different players that can have different motivations than a traditional IPO. In a traditional IPO, a private company may slowly prepare to become a public company, augmenting staffing and systems over a period of years, before engaging with underwriters that will conduct an initial public offering of securities for the company. By comparison, in a SPAC merger, t