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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

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