Money Talks
Why a SPAC Bubble Is Actually Good for the Economy
A boom in blank-check IPOs is setting off alarms, but they solve a very real problem for some companies
Money Talks is a column that explores what happens when business, the economy, and culture collide.
In 1720, the English economy was gripped by a speculative mania known as the South Sea Bubble. The hysteria began with a steep rise in the stock price of a government-connected firm called the South Sea Company, but soon investors were happily bidding up stock prices across the board. In response, a host of new companies offering a wide array of unlikely products and services quickly incorporated and sold shares to hungry investors. One company described its business as trading in hair. Another promised to transmute quicksilver into a malleable fine metal, and one said it was going to build “a wheel for perpetual motion.”
That these claims were outrageous and impossible to verify — when not self-evidently false — was, at that moment, seemingly irrelevant to investors. It was enough that their stocks were going up. So soon the most clever of all these new companies came forward, and sold shares to the public with a prospectus that said it was raising money “for carrying on an undertaking of great…
