Last week we talked about what an IPO is. This week we’ll discuss an acronym that’s appearing with increasing frequency in the international financial press: SPAC. What is a SPAC? It stands for “special purpose acquisition company.” These are firms that are listed on the stock exchange but do not, however, have any operations of their own. They raise funds from investors to use toward the purchase—either total or partial—of other companies, which then become publicly traded. This is a type of IPO known as a “reverse merger.” SPACs, known as “blank-check companies,” have existed for decades: well-known companies such as Burger King, TGI Friday’s, and, more recently, Virgin Galactic—Richard Branson’s company planning space travel—went public thanks to this mechanism. Some, like Burger King in 2012, have been huge successes. Others, such as TGI Friday’s, turned out to be resounding failures. In 2020, they began to take off, and 2021 is shaping up to be their breakout year. Before the end of the first two months of the year (through February 23), there were 166 SPAC IPOs totaling $38.3 billion. That number compares to the 248 SPAC IPOs recorded in all of 2020 and the 59 in all of 2019. One of the sectors favored by SPACs this year is electric vehicles.

* Through February 23

Source: SPAC Insider