A primer on, and critical look at, one of Wall Street’s hottest trends: special purpose acquisition companies.

This episode is sponsored by Bitstamp and Crypto.com.

Special purpose acquisition companies have been around since the 1990s, but have seen a significant uptick in popularity in recent years. Companies like Virgin Galactic, Draft Kings and Nikola have changed SPAC’s reputation from a tool for second- and third-tier private equity shops to win fees to a legitimate alternative to initial public offerings. In 2020, SPACs have made up roughly 40% of the IPO market.

Recently, chatter around SPACs reached a fever pitch with the listing of Bill Ackman’s Pershing Square Tontine Holdings – the largest-ever SPAC.

In this episode, NLW breaks down:

  • What a SPAC is
  • Standard SPAC terms
  • Why the traditional IPO process has generated growing discontent, especially from Silicon Valley
  • The benefits of SPACs for companies and investors
  • The downsides of SPACs for companies and investors
  • A number of reasons explaining why SPAC popularity is surging now
  • How Robinhood retail traders are creating an important bridge buyer for SPACs
  • Why Ackman’s Tontine Holdings SPAC could change how we think about SPACs in the future
  • Are SPACs a bubble?

Cited resources:

SPAC Man Begins – Alex Danco

SPACs as a Call Option on Hype – Bryne Hobart

SPACs: the most ludicrous bubble we’ll ever see… why not $IAC? – Yet Another Value Blog

Return of the SPAC – John Street Capital