- Special-purpose acquisition companies — aka “blank-check” companies — are having a moment on Wall Street. The investment vehicles have raised more than $40 billion already in 2020 and are on track to more than triple last year’s total of $14 billion.
- SPACs have recently attracted bold-faced names such as hedge-fund titan Bill Ackman, LinkedIn founder Reid Hoffman, Silicon Valley power player Dragoneer Investment Group, and “Moneyball” star Billy Beane.
- But there’s an ecosystem of advisors, salespeople, and lawyers pitching blank-check companies to investment platforms and wealthy people as viable financing options.
- We spoke with more than a half dozen industry insiders to come up with a list of the market’s most influential players.
- Visit Business Insider’s homepage for more stories.
One of Wall Street’s most talked-about trends is the wave of special-purpose acquisition companies, or SPACs, that have launched IPOs at such a torrid pace that they’re on track to raise more than triple last year’s totals.
One-hundred and twelve SPACs, aka “blank-check firms,” have raised more than $40 billion so far this year — compared to 59 last year that raised less than $14 billion — according to the website SPAC Research. There are now 183 shell companies with $57 billion to spend on bringing other companies public, the data provider said.
More than the money is that the vehicles are now seen as a viable alternative for companies looking to go public in a way that they haven’t ever been before. Famed Silicon Valley investor Bill Gurley, an outspoken proponent for rethinking the traditional IPO process, lent his support to SPACs in a recent blog post touting their benefits for certain companies.
The companies, which initially have no revenue or operating assets, raise money from investors by selling shares, typically for $10. They then put that money into a trust until it’s time to buy another company.
The development of the SPAC market over the past few years is often credited to the sponsors of the vehicles, the people who launch them in return for a stake in the merged company once the SPAC has found a willing seller.
In recent months boldface names like hedge-fund titan Bill Ackman, LinkedIn founder Reid Hoffman and Silicon Valley power player and Dragoneer Investment Group founder Marc Stad have raised funds for SPACs. Ex-Citigroup investment banker Michael Klein completed the largest SPAC-led merger in history this year.
But there’s also an entire ecosystem of advisors, salespeople, and lawyers increasingly pitching blank-check companies to investment platforms and wealthy people. Asset managers like Fidelity, T. Rowe Price, and Capital Research are also increasingly participating in the market, lending an additional aura of respectability to what had once been considered a back corner of the financial markets.