We no longer support this browser. Using a supported browser will provide a better experience.

Please update your browser.

Close browser message

What is a SPAC?

A growing asset class that can no longer be ignored, SPAC IPOs have become an attractive proposition for sponsors, public investors and private companies.

March 12, 2021

In a record year, 2020 was dubbed the “Year of the SPACs” in the United States. SPAC IPO issuance reached an all-time high, with over $80bn raised in more than 230 Initial Public Offerings (IPOs). This accounted for nearly half of the total U.S. IPO market, a significant increase compared to 2019.

And the momentum continues. With just a few months into the new year, $61.5b was raised in 194 SPAC IPOs for January and February. This compares to $3.4bn in 12 SPACs during the same timeframe in 2020. SPAC merger activity has also significantly accelerated, with more than $600b of firm value and nearly $30b of PIPE deals (private investment in public equity deals) announced since January 2020.

The SPAC surge has been fueled by a wider realization of the benefits for various stakeholders. A sponsor’s strong credibility and track record are key enablers for the acquisition, and, for sponsors, the upside is financial return from the transaction. SPAC investors get the opportunity to be a part of a process, and the financial upside, of taking a company public, while having the option to redeem their capital if they so desire. Finally, SPACs enable some private companies to go public in an alternative route to the IPO and benefit from the experience and network provided by the sponsors.

The SPAC trend is catching on in Europe, with increased interest from sponsors, investors and potential target companies. “2021 is going to mark the emergence of European SPACs,” said Aloke Gupte, Co-Head Equity Capital Markets, EMEA. “We expect this to take shape as either U.S.-listed SPACs by European management teams targeting Europe, or Europe-listed SPACS and regional investment.” Initial SPACs in the region will have a first-mover advantage to capture investor attention given the lack of competition. “As European SPACs become prevalent, they will serve as a highly interesting mechanism for some private companies that find listing through a SPAC a more efficient and effective process than the traditional IPO,” said Gupte.

The traditional U.S. structure for SPACs is now able to be largely replicated in Europe, a change that is driving Gupte’s expectation for increased volumes this year. “Scarcity value is attracting substantial U.S. and European investor demand for European SPACs,” added Gupte.

What Is A Special Purpose Acquisition Company (SPAC)?

A publicly listed shell company that raises cash via an IPO, and has a set amount of time (usually 24 months) to invest it. This happens by merging with a private company and taking it public through acquisition. A SPAC is “sponsored” by a group of high-profile individuals, sponsors, corporates or family offices that typically have a strong operating or financial track record.

As European SPACs become prevalent, they will serve as a highly interesting mechanism for some private companies that find listing through a SPAC a more efficient and effective process than the traditional IPO.

Aloke Gupte
Co-Head Equity Capital Markets, EMEA
J.P. Morgan

Podcast: What’s a SPAC?

A simple guide to the investment trend
Produced by Marketplace Morning Report by BBC World Service

Featuring Aloke Gupte, Co-Head Equity Capital Markets, EMEA, J.P. Morgan
Listen now

SPAC IPOs: Issuance Reaches Record High

SPAC IPO issuance reached an all-time high, with over $80bn raised in more than 230 Initial Public Offerings.

Group 7 Created with Sketch. Annual U.S. SPAC IPO volume ($bn) Source: J.P. Morgan, Results from the survey “Tracking the ESG implications of the COVID-19 Crisis” 2018 2019 2020 2021 YTD Q120 Q220 Q320 Q320 Q121 $44 $37 $33 $8 $4 $44 $81 $13 $10 37 52 231 139 20 10 121 80 139 $278 $252 $352 $319 $390 $373 $306 $409 $319 $690 $690 $4,000 $1,380 $1,000 $1,035 $4,000 $1,050 $1,380 18% 22% 49% 65% 35% 32% 51% 56% 65% # SPACs Avg SPAC size ($mm) Largest SPAC IPO ($mm) % of IPO mkt

Source: Dealogic as of 01/22/21
1Includes SPAC IPOs ≥$100mm since 2015
Note: Performance data for closed transactions

SPAC Sector Breakdown

While SPACs have straddled multiple sectors, the desire for high-growth areas is probably the most prevalent theme and we have seen a large number of Tech/Tech-enabled SPACs.

Group 8 Created with Sketch. SPACs looking for targets by sector ($88bn | 269 SPACs) Generalist/ other $35bn | 92 $2bn | 6 TMT / Tech-inclined $28bn | 78 Consumer $7bn | 26 Healthcare $7bn | 31 FinTech $5bn | 12 Industrials Energy FIG $3bn | 13 $3bn | 11

Source: Dealogic as of 01/22/21
1Includes SPAC IPOs ≥$100mm since 2015
Note: Performance data for closed transactions

Related Insights

Back to top button Back to top

This material (including market commentary, market data, observations or the like) has been prepared by personnel in the Equity Capital Markets Group of JPMorgan Chase & Co. It has not been reviewed, endorsed or otherwise approved by, and is not a work product of, any research department of JPMorgan Chase & Co. and/or its afliates (“J.P. Morgan”). Any views or opinions expressed herein are solely those of the individual authors and may difer from the views and opinions expressed by other departments or divisions of J.P. Morgan. This material is for the general information of our clients only and is a “solicitation” only as that term is used within CFTC Rule 1.71 and 23.605 promulgated under the U.S. Commodity Exchange Act.

RESTRICTED DISTRIBUTION: This material is distributed by the relevant J.P. Morgan entities that possess the necessary licenses to distribute the material in the respective countries. This material is proprietary and confidential to J.P. Morgan and is for your personal use only. Any distribution, copy, reprints and/or forward to others without permission from, or attribution to, J.P. Morgan is strictly prohibited.

This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute investment, legal or tax advice, nor does it constitute an ofer or solicitation for the purchase or sale of any financial instrument or a recommendation for any investment product or strate gy. Information contained in this material has been obtained from sources believed to be reliable but no representation or warranty is made by J.P. Morgan as to the quality, completeness, accuracy, fitness for a particular purpose or non-infringement of such information. Sources of third party referred to herein retain all rights with respect to such data, and use of such data by J.P. Morgan herein shall not be deemed to grant a license to any third party. In no event shall J.P. Morgan be liable (whether in contract, tort, equity or otherwise) for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction. All information contained herein is as of the date referenced and is subject to change without notice. All market statistics are based on announced transactions. Numbers in various tables may not sum due to rounding.

J.P. Morgan may have positions (long or short), efect transactions, or make markets in securities or financial instruments mentioned herein (or optio ns with respect thereto), or provide advice or loans to, or participate in the underwriting or restructuring of the obligations of, issuers mentioned herein. All transactions presented herein are for illustration purposes only. J.P. Morgan does not make representations or warranties as to the legal, tax, credit, or accounting treatment of any such transactions, or any other efects similar transactions may have on you or your afliates. You should consult with your own advisors as to such matters. The use of any third-party trademarks or brand names is for informational purposes only and does not imply an endorsement by JPMorgan Chase & Co. or that such trademark owner has authorized JPMorgan Chase & Co. to promote its products or services.

J.P. Morgan is the marketing name for the investment banking activities of JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC (member, NYSE), J.P. Morgan Securities plc (authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority), J.P. Morgan AG (authorized by the German Federal Financial Supervisory Authority (BaFin) and regulated by BaFin and the German Central Bank (Deutsche Bundesbank), J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066 and regulated by Australian Securities and Investments Commission) and their investment banking afliates. J.P. Morgan Securities plc is exempt from the licensing provisions of the Financial and Intermediary Services Act, 2002 (South Africa). For Brazil: Ombudsman J.P. Morgan: 0800-7700847 / ouvidoria.jp.morgan@jpmorgan.com

For Australia: This material is issued and distributed by J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/ AFS Licence No: 238066) (regulated by ASIC) for the benefit of “wholesale clients” only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of J.P. Morgan Securities Australia Limited. For information on any J.P.Morgan German legal entity see: https://www.jpmorgan.com/country/US/en/disclosures/legal-entity-information#germany For information on any other J.P.Morgan legal entity see: https://www.jpmorgan.com/country/GB/EN/disclosures/investment-bank-legal-entity-disclosures © 2021 JPMorgan Chase & Co. All rights reserved.