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Alternative Market Briefing

The SPAC boom slows down, but the vehicle remains popular with sponsors

Wednesday, May 26, 2021

Bailey McCann, Opalesque New York:

SPACs have had a rough ride over the past couple of months. A slow down in deal activity combined with increased regulatory scrutiny and investment underperformance have had a chilling effect. A new report from law firm Katten suggests that despite these headwinds, SPACs remain popular with some parts of the market.

According to the report, in the first quarter of 2021, 296 SPAC IPOs were completed. That's 48 more than in all of a record-breaking 2020 - when the total number of SPACs grew by more than 300 percent over 2019. However, it's nearly impossible that the SPAC market will maintain this pace throughout the rest of the year without a significant rebound in activity. Investors in the report suggest that activity might return toward the end of this year and into 2022 after the market has had time to digest recent activity and respond to regulatory concerns.

"It appears, more generally, that the momentum fueling the SPAC market is sustainable," said Brian Hecht, a partner in Katten's New York office.

Regulatory scrutiny was listed as the top reason for the SPAC slowdown. Issuers will have to take a close look at current accounting practices to make sure that they are in line with the SEC's recent comments on accounting projections. This will take some time, however. Respondents seem relatively confident that once the market absorbs these changes activity will return.

Katten surveyed private equity, ve......................

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