America’s “SPAC” boom is coming to Europe
SPACs are shell firms that list on the stockmarket in order to raise cash, then merge with another company. Once confined to the US tech scene, European start-ups are now in their sights.
The US SPAC (special purpose acquisition company) boom is coming to Europe, says Matthew Field in The Daily Telegraph. Also known as “blank-cheque companies”, SPACs are shell firms that list on the stockmarket in order to raise cash. They then use the money to merge with another company. SPACs provide an alternative route to a public stockmarket listing that can be more straightforward than the traditional initial public offering.
The latest SPAC boom started with Richard Branson’s Virgin Galactic space business, which went public through an $800m SPAC in 2019, says Field. Once confined to the US tech scene, European start-ups are now in the crosshairs too: UK electric-vehicle business Arrival is listing on the Nasdaq through a $660m SPAC. New SPAC vehicles are being launched in Frankfurt and Amsterdam.
SPACs allow business founders to bypass “sharp-suited investment bankers” on the way to a public listing, says The Economist. Yet while some SPACs are led by “excellent management teams”, many “don’t know the first thing” about the sectors they are investing in, says an unnamed investment banker. Around 250 SPACs launched last year in the States, raising $83bn. In January, “an average of five were created each working day”. The SPAC boom is a symptom of the “wider exuberance” currently gripping world markets.