In Vogue Again: The Re-Rise of SPACs in the IPO market

Were we to distill 2020 into a single word, from the capital markets’ perspective at least, it would certainly be SPACs, which – although to a different extent – are now having their momentum on both shores of the pond. If, in the United States, SPACs are really enjoying a new lease of life due to the pandemic, as if they were Charon ferrying markets through the darkest of waters, in Europe, although data are not comparable to those registered across the Atlantic, the outlook seems positive. This article focuses on SPACs in the U.S. pre-Covid scenario (between January 2010 and December 2019), in order to understand their structural changes over the years and the grounds for their recent resurgence. Firstly, it aims to identify the length and profitability of such an investment phenomenon and understand the behavior of institutional investors in this context. Then, the possible investment shifts in the sector of SPACs, driven by the 2020 post Covid bubble, are analyzed, relying on data retrieved from different providers and players, and specifically focusing on three main current concerns: the increasing litigation phenomenon, the (resulting) increase in D&O insurance costs, and the engagement of PIPEs as guarantors of the soundness and of the successful outcome of the transaction. The results of this analysis may lead to several considerations and wide-ranging policy implications, but most importantly they reasonably prompt the belief that U.S. SPACs will hold a foreground role in the near future, not plunging back into the shadows (or even worse into the darkness that they had been living in for years), especially if some disclosure tools, like the one suggested here with regard to their sponsors, are implemented. Moreover, SPACs will certainly be able to update and evolve for good, as they have showed themselves capable of doing in the past, thus overcoming the problems and perplexities raised about them.