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Laxman Pai, Opalesque Asia: The special acquisition company (SPAC) segment has boomed this year, with Sir Richard Branson's latest high-profile vehicle taking the number launched in 2020 to 104 and the amount raised to a combined $40bn.
According to Preqin, the amount raised is already more than 3x the 2019 total and a far cry from the start of the latest SPAC boom in 2014, when 12 IPOs raised a total of $1.7bn.
The report said that SPACs are in direct competition with buyout houses for assets but, for all the noise, are minnows. Total capital raised by SPACs this year is less than 4% of the $851bn uninvested equity available to buyout funds globally.
US-focused buyout funds have an estimated $504bn of dry powder, Europe-focused funds $228bn, and Asia-focused funds $100bn according to Preqin Pro.
The recent track record of SPACs suggests investors should pay more attention to prospectus risk factors. Of the 223 SPAC IPOs since the start of 2015, just 89 had completed mergers and taken a company public, according to an analysis by Renaissance Capital in July.
Of these, common shares delivered an average loss of 18.8% and a median return of -36.1%, compared to the average aftermarket return of 37.2% for traditional IPOs since 2015. Only 26 of the SPACS in this group (29%) had positive returns. By comparison, the five-year horizon IRR for buyout funds in December 2019 was 16.2%.
SPACs have proven lucrative for founders and advisors. On 16 September, Br...................... To view our full article Click here
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