Number of the Day

The SPAC Attack, by the Numbers

Everyone’s favorite new route to going public is having quite a year

Photo illustration, source: Michael Raines/Moment/Getty Images

46%: That’s the share of the $103 billion raised through October 2 in U.S.-listed initial public offerings this year that went to Special Purpose Acquisition Companies, or SPACs, according to financial data provider Dealogic.

So far, 2020 has been an unusually frothy year for public markets, which is on track to overtake the boom years of 1999 and 2000 in terms of the money raised in IPOs. While there’s no reason to think this is a repeat of that era’s dot-com bubble, what’s especially unusual this year is how many companies have opted to go public via SPACs (127 to date, versus just 59 in all of 2019), otherwise known as blank-check companies, in which a shell company raises money from public markets with the aim of later merging with a private company that wants to go public. It’s a model that has been championed by venture capitalist and former Facebook growth hacker Chamath Palihapitiya, who most recently announced that he would be merging one of his many SPACs with the real-estate platform Opendoor.

As companies seek to avoid the costs and hassles associated with traditional IPOs, especially time-consuming investor roadshows, SPACs are just one of several alternatives to the traditional IPO that have gained popularity lately. Direct listings, in which a company sells existing shares directly to the public without underwriters or a lockup period, have been another popular alternative, used most recently by Palantir and Asana. But SPACs seem to be the preferred route for those that want to avoid in particular the scrutiny that comes with going public, such as the electric-truck company Nikola, which is under investigation by the DOJ and SEC for allegedly misleading investors. The latest in SPAC-mania: a group of investors raising a $100 million fund to invest exclusively in SPACs.

It may not be the dot-com bubble, but it sure feels like a SPAC attack.

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