What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.
From the investors' side, SPACs are popular because they've been really successful! I don't have stats on this but just buying SPACs surely outperformed any index in the last 5 years. You'd expect this effect to disappear as they get more popular, but it's worth noting that blindly buying IPOs has also been a really good investment strategy - enough first-day pops of 50% or 100% to outweigh the duds - though less accessible to small investors.
There's the firms with clear market appeal who think they're getting underpriced by a conventional IPO model, but I suspect there's also firms who just want to bust onto the market and sidestep the normal disclosure and research cycle.
According to Goldman Sachs, SPACs actually underperform traditional IPOs and the market after their merger.
Source: https://www.barrons.com/articles/spacs-performance-ipo-merge...
SPACs have been around for a long time, also they were considered a junk method of going public due to the nature of SPACs. It's the fact that a few startups managed to IPO with solid results and now it's flavour of the month. It's madness to see and I learned a new word because of it 'cargo cult management'.
You're welcome :). Perhaps you can help me back and explain to me, what's up with SPACs this month? I've been hanging around startup circles for years now, and I've never noticed SPACs until some HN threads yesterday or two days ago. And now I see them everywhere. Did Matt Levine write about them recently or something?
https://trends.google.com/trends/explore?q=SPACs&geo=US
I'm trying to find the first mention of a SPAC and which 'unicorn' was the catalyst to trigger this storm. BUT the key reason is that there are far fewer limitations on the promotion of the stock itself. The startup will be bleeding cash, and a IPO requires too much paperwork and hiding numbers gets harder, SPACs will let a startup raise cash when their metrics are poor and they need cash to keep the ride going.
https://www.bloomberg.com/news/newsletters/2021-01-08/money-...