SPACs, or special purpose acquisition companies, might maintain its momentum even in 2021. More companies, no matter how big or small, have started to go with the shortcut to IPO with SPACs.
Companies and investors see SPACs as promising deals, more to emerge in 2021
Tech Crunch noted that 2021 has so far recorded 59 new SPAC offerings, raising $16.8 billion in total. The figure alone has beat out the amount of SPAC offerings in 2019, and might soon outnumber 2020’s record too.
More venture capitals are also starting to pour money on black-check companies. This week, Fifth Wall Ventures, who has been in the industry for four years focusing on L.A.-based proptech, reportedly has booked plans to raise $250 million for a SPAC. Similarly, Intel Chairman Omar Ishrak is planning to roll between $750 million and $1 billion for a blank-check firm aiming at the health tech sector deals. Gores Group was also found to be planning on raising $400 million in its newest blank-check company’s IPO. Accordingly, Tech Crunch pointed out that this will be the seventh SPAC to date from the firm.
SPAC process is, however, been gaining critics from several sides. Easier and faster access to IPO is attracting developing businesses. Take for example Opendoor, Luminar Technologies, and Virgin Galactic. These companies are mostly still in need of capital and might not have found much more funding from a private market investor, Tech Crunch notes.
This phenomenon was commented by SpaceX director Steve Juvetson. Juvetson said that Virgin Galactic has not given “positive business development” despite the public listing. “They announced that they’re going to develop a hypersonic plane, but that has zero synergy with the current business they’re trying to launch, which is suborbital spaceflights, which have yet to happen for customers,” Juvetson added.
SPACs: the other side of the coin
On the other hand, SPACs prove to bring benefit to promising companies. United Wholesale Mortgage, one of the biggest mortgage companies in the U.S., has just gone public through SPACs after 25 years. By the end of trading, the company closed at $11.35, slightly lower than the starting price of $11.54. The firm’s value was up at $16 billion after the merger with the blank-check company that Gores Holdings IV put its bet on.
Being a mature company that claimed to have generated $1.3 billion in revenue in the third quarter of 2020, UWM is winning a lot through the SPACs. Note that UWM also managed to go public in less than a year. Gores Holdings IV had completed the IPO of the company back in January 2020 with $425 million raised. Led by Alec Gores, the tie-up announce in September added $500 million private placement in.
Despite all the up and downs of SPACs, the process does benefit a lot on companies. Furthermore, it does not limit the process to bigger companies. It also caters to smaller companies who are looking for a chance to go public.
Read also: Investing in a SPAC: The Considerations
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