Are SPACs the new IPOs?

What are SPACs and what’s coming next?

4 min readMar 19, 2021

By Vanessa Malone

As of March 17, 2021, 268 special purpose acquisition companies ‘SPACs’ have raised over $87 billion in gross IPO proceeds.¹ In 2020, a record year for SPACs, 248 companies raised over $83 billion. This means that in just three months, the SPAC market raised more than it has the entire year of 2020. Europe also recently entered the SPAC race netting $495 million in 2020, with other jurisdictions expected to follow.²

The SPAC frenzy is making headlines with the SPACs’ high-profile management teams and hefty valuations. A number of companies are deciding to join the SPAC party.

Just this week crypto trading platform, eToro, announced it will become publicly traded through a SPAC merger. According to eToro, this gives an implied equity value of about $10.4 billion.³

This news follows another company in the crypto space, Coinbase, which recently announced it will be going public via a direct listing. We think this could spark more companies in the fintech, blockchain, and crypto space to go public, perhaps via SPACs.

So what are SPACs and what’s to come?

What are SPACs?

A Special Purpose Acquisition Company (“SPAC”) is a company with no commercial operations formed solely to raise capital through an initial public offering (“IPO”) for the purpose of acquiring an existing company.

These companies are also referred to as “blank check companies” and are generally formed by “Sponsors,” a group of experienced investors with significant expertise in a particular industry, with the intention of pursuing deals in that area. Because the SPAC has no financials initially, the decision for investors to participate relies heavily on the Sponsors and their ability to make a successful deal within two years.

Combining the experience and expertise of its management team with the capital needed to acquire a company provides SPACs with the flexibility to target multiple investment opportunities. A SPAC generally has two years to complete a deal or face liquidation. After a company acquisition, a SPAC usually trades on a regulated stock exchange.

Why SPACs?

There are various reasons why SPACs have established themselves as viable alternatives to traditional IPOs but a key advantage is that they can offer a more cost effective and less demanding IPO path.

SPAC Sponsors can expect to pay a 2% underwriting fee at the time of the SPAC IPO, with an additional 3.5% underwriting fee (i.e. based on the SPAC IPO size).⁴ By comparison, traditional IPO fees are typically ~7% of the proceeds raised through the IPO process.⁵

These fees compared to the costs and time associated with a traditional IPO, in order to prepare the extensive financials, full investor roadshow, etc., make SPACs an attractive option. The two-year time limit to find an acquisition also incentivizes Sponsors to identify a deal where traditional IPOs can delay the process.

Who can participate in SPACs?

To date, SPACs have almost exclusively been offered to well-connected institutional investors, Wall St., and the world of private equity and hedge funds.

The everyday investor, or retail investors, aren’t typically gaining early access to the hottest SPAC deals. Instead they have to wait until the SPACs are public where they can invest through their traditional brokerages. Because of the nature of SPACs, they are basically public from the very start. This means investors could purchase shares at a relatively low price still if they’re quick, but they have to battle the other interested investors hoping to claim their stakes.

What’s next?

We believe the trend of crypto and blockchain related companies going public via SPACs will continue to grow. For companies in those industries, SPACs could remove the headache involved with the regulatory uncertainty surrounding the new technology.

Further, just like we saw with the GameStop stock frenzy that has pushed retail investing interest in capital markets to an all-time-high, we believe there will be greater retail investor interest in SPACs.

We believe the SPAC trend will continue upward and we look forward to how the market will evolve.

About Upstream:

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About Horizon:

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1 SPAC IPO Transactions Statistics — by SPACInsider


3 eToro PR


5 Jstor




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