Is the 2020 SPAC boom an echo of the 2017 ICO craze?
I wanted to write an essay aboutMicrosoft and TikTok today, because I was effectively a full-time reporter covering the software giant when it hired Satya Nadella in 2014. But, everyone else has already done that and, frankly, there’s a more pressing financial topic for us to parse.
Let’s take a minute to take stock of SPAC (special purpose acquisition companies) which have risen sharply to fresh prominence in recent months. Also known as blank-check companies, SPACS are firms that are sent public with a bunch of cash and the reputation of their backers. Then, they combine with a private company, effectively allowing yet-private firms to go public with far less hassle than with a traditional IPO.
And less scrutiny, which is why historically SPACs haven’t been the path forward for companies of the highest-quality; a look at the historical data doesn’t paint a great picture of post-IPO performance.
But that historical stigma isn’t stopping a flow of SPACs taking private companies public this year. A host of SPACs have already happened, something we should have remarked on more in Q1 and Q2.
Still, better late than never. This morning, let’s peek at two new pieces of SPAC news: electric truck company Lordstown Motors merging with a SPAC to go public, and fintech company Paya going public via FinTech III, another SPAC.
We’ll see that in hot sectors there’s ample capital hunting for deals of any stripe. How the boom in alt-liquidity will fare long-term isn’t clear, but what is plain today is that where caution is lacking, yield-hunting is more than willing to step in.
Electric vehicles as SPAC nirvana
The boom in the value of Tesla shares has lifted all electric vehicle (EV) boats. The value of historically-struggling public EV companies like NIO have come back, and private companies in the space have been hot for SPACs as a way to go public in a hurry and cash in on investor interest.
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