Red hot market Special-purpose acquisition companies, or SPACs, are “scattered across a halt”, according to CNN. As the SPAC market has grown over the past six months, it seems that everyone was getting involved in the game, with celebrities ranging from Shaquille O’Neill to former House Speaker Paul Ryan leading their own SPACs.
But shareholder lawsuits, huge price fluctuations and warnings from the US Securities and Exchange Commission have all thrown themselves onto the SPAC market, at least temporarily. So are privately held tech companies publicly considering the need to know about the SPAC process and the market?
Despite some warning signs, there are still hundreds of SPACs in the market looking for close deals, and there may still be a lot of changes in the process.
First, the upside of SPACs: they are a more efficient way for a private company to go public than a traditional IPO. By merging with an SPAC rather than launching an IPO, a private company can avoid the rigors of working with an underwriter, hosting a roadshow, preparing a prospectus, and avoiding other complications of the public filing process.
In addition, it could potentially be a fast track in an IPO with an experienced partner who has experience navigating the process.
It also has great potential. For example, shareholders of a private company will often roll over their stock and provide significant cash liquidity. SPACs provide more certainty about the valuation of a private company than a traditional IPO, and some experts believe that SPACs can add up to 20% to a company’s selling price compared to a typical private equity transaction .
And, especially when the SPAC market was hot, many SPACs could create a bidding war to raise prices and generate more favorable terms for transactions than traditional capital markets.
Finally, partnering with an experienced management team and influential industry insiders can help a private company accelerate its financial growth and create long-term value.
All of these gains led to a dramatic increase in SPAC transactions in late 2020 and early 2021. But the market cooled sufficiently in April, due to high-profile problems in the market and indications that the SEC is closely examining the entities. Future.