SPAC Boom in the U.S.
This article is published in collaboration with Statista
by Willem Roper
Special purpose acquisition companies (SPACs) had an enormous year in 2020. New data highlights how the number of SPAC IPOs last year dwarves all previous years, and how the trend for 2021 looks to capitalize and even surpass that enormous number.
In data collected by SPACInsider, there were 248 SPAC IPOs in the U.S. over the course of 2020. That obliterates the record set in 2019 of just 59, with most years over the last decade failing to produce more than 20 SPAC IPOs. So far, as of Jan. 12, there have already been 34 SPAC IPOs in the U.S. in 2021 – a pace that would shatter the 248 set in 2020.
SPACs are simple yet highly effective in the volatile state of the current U.S. economy. Their purpose is to utilize the process of IPOs to raise enough capital to acquire an existing company. They operate as barebones companies with no commercial or business operations and are largely comprised of wealthy investors and experts in a particular industry.
What makes SPACs so attractive in the current economic climate is both wealthy investors looking for deals and owners of small companies looking to mitigate economic damage to their business in the wake of COVID-19. The implementation of an IPO can often revitalize a company and set it back up for success after months or years of stagnation or losses. It remains to be seen, however, what the long-term impact of SPAC acquisitions and IPOs will be on the U.S. economy over the coming years. Ultimately, SPACs often consolidate power among wealthy sponsors and spreads risk to initial investors – essentially using the IPO system to pass volatile company risk to the average stakeholder.
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