Actionable Ideas for Companies and Sponsors
SPAC IPOs Can Get Done In Volatile Markets
In the current equity environment, the window for most traditional IPOs is largely closed. However, as noted below, investor receptivity to SPAC IPOs has proven to be far greater in higher volatility equity markets. In addition, for the SPAC IPO sponsor, raising a SPAC IPO over the next few quarters should be very timely, as there should be numerous attractive acquisition opportunities that emerge from this economic environment.
Three of the five U.S. IPOs priced in March 2020 have been SPACs and 8 of the 13 IPOs publicly filed in March have also been SPACs. Because SPAC share prices are supported by their cash-in-trust value, the existing SPAC IPOs have seen limited downside in the aftermarket despite the sell-off in the equity markets. Since the market hit an all-time high on February 19th, the S&P is down over 30% while SPACs are down 5% on average. Another example of SPAC IPO activity in challenging equity markets was Q1 2019 (after the market sell off in December 2018) when 15 SPAC IPOs were completed for $3.3 billion in proceeds, and SPAC IPOs represented 50% of the U.S. IPO market in that quarter.