By Patturaja Murugaboopathy
(Reuters) – Global blank-check deal volumes, or mergers through special purpose acquisition companies (SPACs), have surged to a record $170 billion this year, already outstripping last year’s total of $157 billion, Refinitiv data showed.
The record number of deals comes as SPACs are emerging as a popular IPO alternative for companies, providing startups with a path to going public with less regulatory scrutiny.
GRAPHIC: SPAC index vs SPX – https://fingfx.thomsonreuters.com/gfx/mkt/xklpyregmvg/spac%20index.jpg
The latest data showed companies targeted by SPACs have been primarily from the automobiles, software and aerospace sectors this year.
SPACs are shell companies that raise funds to acquire a private company with the purpose of taking it public, allowing such targets to sidestep a traditional initial public offering.
GRAPHIC: SPAC M&As – https://fingfx.thomsonreuters.com/gfx/mkt/bdwvkmgdlvm/spac%20ipos.jpg
They have gained in popularity in recent months, with investors increasingly looking to growth stocks for higher returns, and as the COVID-19 pandemic disrupted the traditional IPO process.
GRAPHIC: TOP 10 SPAC targets – https://fingfx.thomsonreuters.com/gfx/mkt/dgkplemwkvb/top%2010%20spac%20targets.jpg
The SPAC deals involving Lucid Motors, Alright Solutions, and Fertitta Entertainment Inc have been the largest by deal value this year, the data showed.
U.S. SPACs have raised $64.2 billion through IPOs so far this year, or 76% of the total equity raised by IPOs in the market.
GRAPHIC: SPAC vs Equity IPOs comparison – https://fingfx.thomsonreuters.com/gfx/mkt/oakpelgagvr/SPAC%20vs%20equity%20ipos.jpg
However, the shares of SPAC companies have slumped recently on concerns their valuations have become inflated, amid a rise in U.S. Treasury yields.
GRAPHIC: Money raised through listing by SPACs – https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjwglepr/IPO%20countrywise.jpg
The IPOX SPAC Index, which tracks the performance of listed SPACs, has fallen over 12.5% in the past month, compared with the broader index’s decline of 2.4%.
GRAPHIC: SPAC deals by sectors – https://fingfx.thomsonreuters.com/gfx/mkt/qmyvmrmgqpr/SPAC%20Sectors.jpg
(Reporting by Patturaja Murugaboopathy. Editing by Mark Potter)