SPACs

I wrote on Tuesday about the IPO craze and how companies are looking to hit the public market earlier. As I wrote about on Tuesday, this trend is sparked by the rise of SPACs.

Private companies are looking to SPACs as an alternative to venture capital funding in the private markets. SPACs offer one of the biggest advantages that companies seek out in the private markets — they get to partner with a reputable firm that can help them achieve goals.

Of course this partnership also includes the best aspects of the public market including easier access to capital and liquidity for employees.

In a sense, SPACs offer a happy medium to go public. They do not have to go at it on their own like a direct listing. They do not have to partner with a bank that largely controls the process. SPACs are an in between option that allows companies to largely dictate terms and choose their partners.

Of course, SPACs aren’t perfect and every company needs to weigh the pros and cons of direct listing, SPACs and the traditional IPO process.

SPACs have a long way to go before they become a mainstream way to go public. We are only touching the surface of the SPAC craze and the next year will be fun to watch whether this a trend to stay or whether it will be another 2020 fad.