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SPACs 101: A Bubble, the Future or Both?
A primer on, and critical look at, one of Wall Street’s hottest trends: special purpose acquisition companies.
Updated Sep 14, 2021, 9:36 a.m. Published Jul 27, 2020, 7:00 p.m.
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A primer on, and critical look at, one of Wall Street’s hottest trends: special purpose acquisition companies.
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This episode is sponsored by Bitstamp and Crypto.com.
Special purpose acquisition companies have been around since the 1990s, but have seen a significant uptick in popularity in recent years. Companies like Virgin Galactic, Draft Kings and Nikola have changed SPAC’s reputation from a tool for second- and third-tier private equity shops to win fees to a legitimate alternative to initial public offerings. In 2020, SPACs have made up roughly 40% of the IPO market.
See also: The Real Story Behind Tesla’s Crazy Rally
Recently, chatter around SPACs reached a fever pitch with the listing of Bill Ackman’s Pershing Square Tontine Holdings - the largest-ever SPAC.
In this episode, NLW breaks down:
- What a SPAC is
- Standard SPAC terms
- Why the traditional IPO process has generated growing discontent, especially from Silicon Valley
- The benefits of SPACs for companies and investors
- The downsides of SPACs for companies and investors
- A number of reasons explaining why SPAC popularity is surging now
- How Robinhood retail traders are creating an important bridge buyer for SPACs
- Why Ackman’s Tontine Holdings SPAC could change how we think about SPACs in the future
- Are SPACs a bubble?
Cited resources:
SPAC Man Begins - Alex Danco
SPACs as a Call Option on Hype - Bryne Hobart
SPACs: the most ludicrous bubble we’ll ever see… why not $IAC? - Yet Another Value Blog
Return of the SPAC - John Street Capital
For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
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