SPAC-tastic

7 April 2021 By Richard Beales Follow @richardbeales1

Blank-check vehicles are flawed, but they bring new businesses to public markets. If the hot first-quarter pace keeps up, SPACs could double the number of firms traded on U.S. exchanges in maybe four years. Even if activity slows, it’s a reason watchdogs may treat them gently.

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The U.S. Securities and Exchange Commission has opened an inquiry into special-purpose acquisition companies, Reuters reported on March 24, citing four people with direct knowledge.

SPACs, also known as blank-check companies, surged in popularity in 2020 and into 2021. Last year, 248 went public through initial public offerings in the United States, according to data from SPAC Research, raising $83 billion. As of April 5, the tally for 2021 was already 298 IPOs raising $97 billion.

In October 2020 Alison Herren Lee, then a commissioner and now the acting chair of the SEC, identified SPACs and direct listings as innovations with “the potential to help issuers address certain of the challenges involved in going public, and therefore enliven public markets and expand investor opportunities.”

The number of U.S. companies listed on the New York Stock Exchange, Nasdaq and similar venues peaked above 8,000 in 1996. That figure declined to nearer 4,000 by 2018, according to the World Bank. Inconsistent definitions and companies with multiple listings make a precise count difficult; other sources give slightly different totals but show a similar trend.

Context News

The U.S. Securities and Exchange Commission has opened an inquiry into special-purpose acquisition companies, Reuters reported on March 24, citing four people with direct knowledge.

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