INTHEBLACK October 2021 - Magazine - Page 16
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// FAS T F O C U S
STORY GARY ANDERS
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THIS SPACE
AT A
GLANCE
Special purpose
acquisition companies
(SPACs) are entities that
are listed on a stock
exchange but have no
active business
operations.
The capital raised from
SPAC listings in the US
hit a record high in 2020,
coming in at US$83 billion
(A$113 billion) across
almost 250 initial
purchase offerings.
L AS T Y E A R S AW R E C O R D - H I G H
C A P I TA L B E I N G R A I S E D F R O M
LISTINGS OF SPECIAL PURPOSE
A C Q U I S I T I O N C O M PA N I E S – S PA C S
– A N D T H E ASX I S K E E P I N G A
C L O S E WAT C H O N T H E “ S PA C
PHENOMENON” AND HOW IT COULD
P L AY O U T I N A U S T R A L I A .
I
n financial circles they are known as special
purpose acquisition companies or SPACs –
shell entities with no active business
operations that have been listed on a stock
exchange.
With a stockpile of cash raised from
investors, the sole objective of the venture
capitalists behind each SPAC is to seek out a
privately held company that can be acquired
and then taken public.
Compared to a traditional initial public
offering (IPO), the process for listing a SPAC is
typically less arduous on a regulatory level and
therefore quicker and considerably cheaper.
The benefit for investors is that they can tap
into the investment skill sets of the people behind
the SPAC right at the ground floor and potentially
receive a strong capital return over time.
However, this is a waiting game, because the
management behind a SPAC generally don’t
have a specific target in mind when their
takeover vehicle is listed. They have about
two to three years to complete an acquisition
following the SPAC’s IPO. If they don’t, they
must liquidate the company and return the
capital raised to the other investors.
The bulk of SPAC listings to date have been in
the US, and last year set a new record, with more
than US$83 billion (A$113 billion) in capital being
raised from investors across almost 250 IPOs.
That US dominance is rapidly changing,
however, with the Euronext Amsterdam having
emerged as the favoured stock market for
European SPAC listings. The London Stock
Exchange is also considering relaxing its
existing listing rules to encourage an increase
in UK SPAC listings.
16 ITB October 2021