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- 2020 has been the year of the SPAC, with 219 “blank-check” companies raising $73 billion in proceeds year-to-date, according to a Thursday note from Goldman Sachs.
- The 462% year-over-year jump in proceeds raised by SPACs this year outpaced traditional IPOs, which raised $67 billion year-to-date.
- The SPAC craze accelerated over the summer, with more than one new SPAC IPO per day since July and 18 SPAC IPOs completed just last week, Goldman highlighted.
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The SPAC craze of 2020 has shown no signs of slowing down, as more and more companies sidestep the traditional IPO process in favor of a faster and cheaper path to public markets.
SPACs, or “blank-check” companies, are formed with the intention of acquiring or merging with a private company to bring them public. The average SPAC needs to complete an acquisition within two years of its debut or the capital raised must be returned to investors.
Year-to-date, 219 SPACs have raised $73 billion in proceeds, representing a year-over-year jump of 462% and outpacing traditional IPOs by $6 billion, according to a Thursday note from Goldman Sachs.
High profile companies that have gone public via SPACs include Virgin Galactic, DraftKings, and Nikola, representing a class of ambitious growth names riding the long-term secular trends of space exploration, sports betting, and electric vehicles.
The red-hot trend towards SPAC IPOs could only work in an investment environment where there is an “increased focus” on growth over value, Goldman Sachs observed.
"A majority of SPAC IPOs completed this year are searching for targets primarily in Information Technology, Health Care, or Consumer Discretionary, a shift from previous years when acquisition targets were dominated by traditional value sectors such as Energy, Industrials, and Financials," Goldman said.
And the SPAC trend has only accelerated into year-end. Since July, more than one SPAC IPO per day has been completed, and last week alone witnessed the debut of 18 SPAC IPOs, according to Goldman.
Investors should expect the trend to continue in 2021, according to Goldman.
"With the Fed committed to keeping the funds rates near zero, our view is that SPAC activity will continue at a high pace in 2021," Goldman explained.
Here's the current status of the 272 SPACS that have raised $88 billion in proceeds since August 2018, according to the note: 1 has been withdrawn, 31 have completed a merger (11%), 47 have announced a merger that is pending completion (17%), and 193 with $63 billion in equity capital are searching for a merger target (71%).
The biggest SPAC of the year came from Bill Ackman's Pershing Square Tontine Holdings, which raised $4 billion in proceeds from investors.
