What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.
From the company's side, there is a willingness to explore non-traditional methods of going public (see also: direct listings, or not going public at all). I would say this has been driven directly by a perception that companies leave money on the table in traditional IPOs, and indirectly by the rise of the "disruptor" mindset led by tech companies where CEOs are more willing to challenge the status quo.
From the investors' side, SPACs are popular because they've been really successful! I don't have stats on this but just buying SPACs surely outperformed any index in the last 5 years. You'd expect this effect to disappear as they get more popular, but it's worth noting that blindly buying IPOs has also been a really good investment strategy - enough first-day pops of 50% or 100% to outweigh the duds - though less accessible to small investors.
> From the investors' side, SPACs are popular because they've been really successful! I don't have stats on this but just buying SPACs surely outperformed any index in the last 5 years.
According to Goldman Sachs, SPACs actually underperform traditional IPOs and the market after their merger.
I'd suspect there's two different flows towards "non-traditional" listings.
There's the firms with clear market appeal who think they're getting underpriced by a conventional IPO model, but I suspect there's also firms who just want to bust onto the market and sidestep the normal disclosure and research cycle.
it's exactly that. there's more demand for IPOs than supply of them at the moment, so people are willing to invest in less well regulated options, such as SPACs (which are basically just a workaround the regulatory burden of IPO)
Follow the 'unicorn' startups and you will find all of the origin's for buzzwords.
SPACs have been around for a long time, also they were considered a junk method of going public due to the nature of SPACs. It's the fact that a few startups managed to IPO with solid results and now it's flavour of the month. It's madness to see and I learned a new word because of it 'cargo cult management'.
> and I learned a new word because of it 'cargo cult management'
You're welcome :). Perhaps you can help me back and explain to me, what's up with SPACs this month? I've been hanging around startup circles for years now, and I've never noticed SPACs until some HN threads yesterday or two days ago. And now I see them everywhere. Did Matt Levine write about them recently or something?
I'm trying to find the first mention of a SPAC and which 'unicorn' was the catalyst to trigger this storm. BUT the key reason is that there are far fewer limitations on the promotion of the stock itself. The startup will be bleeding cash, and a IPO requires too much paperwork and hiding numbers gets harder, SPACs will let a startup raise cash when their metrics are poor and they need cash to keep the ride going.
Perhaps everything comes around again once sufficient people have forgotten the lessons from last time - e.g. maybe the story from the South Sea Bubble in 1720 of "a company for carrying out an undertaking of great advantage, but nobody to know what it is" was an early SPAC ... https://en.wikipedia.org/wiki/South_Sea_Company#Quotations_p...
basically they became much more accessible to regular people, and thus much more exposed to the pump+dump cycle and hucksters. I'm not saying SPACs are bad, but I think that is what is driving the recent craze. The number of wildly speculative and clear astroturf threads on reddit about PSTH or CCIV and others is crazy.
In additional to what others have said, If you have access to some private "non-traditional capital", say a family office or PE, and they're interested in investing in or buying your company, and you'd like to stay somewhat autonomous but still take their money, a spac is an interesting vehicle.
From the investors' side, SPACs are popular because they've been really successful! I don't have stats on this but just buying SPACs surely outperformed any index in the last 5 years. You'd expect this effect to disappear as they get more popular, but it's worth noting that blindly buying IPOs has also been a really good investment strategy - enough first-day pops of 50% or 100% to outweigh the duds - though less accessible to small investors.