- Special purpose acquisition companies, also known as “blank check” companies, have seen a surge in popularity in 2020 as several high-profile companies went public via a SPAC reverse-merger.
- So far in 2020, there have been 39 SPAC IPOs that have raised gross proceeds of $12.3 billion, according to SPACInsider, nearly eclipsing all SPAC gross proceeds raised in 2019.
- Here are five important SPACs to keep an eye on in 2020.
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Some private companies are taking an unconventional route to going public, and investors should start to take notice.
A special purpose acquisition company (SPAC) is commonly referred to as a “blank check” company because investors essentially write a check to a publicly traded shell company whose sole intent is to go shopping for a private company and in effect bring it public via the listed holding company.
Going public through a reverse merger with a SPAC side-steps the traditional IPO route by avoiding coast-to-coast roadshow presentations to institutional investors and can save companies costly investment banking fees.
SPACs typically sell common shares at $10 per unit, which is why exchange-listed SPACs that have yet to announce an acquisition trade very close to $10. But once a SPAC announces an acquisition, its stock price can see a surge in trading activity (and price), as evidenced by some high-profile SPACs in late 2019 and 2020.
According to SPACInsider, a website that compiles and analyzes data related to SPACs, there have been 39 SPAC IPOs that have raised gross proceeds of $12.3 billion so far in 2020. This year’s data is markedly higher than 2019, when 58 SPAC IPOs raised total gross proceeds of $13.6 billion, suggesting investors and high-profile public companies are warming up to the idea of going public via SPACs.
Here are five widely followed SPACs investors should watch, from some that have formally completed their announced acquisitions, to those that are still on the hunt for the right private company to acquire.