SPAC's - Hot or Not?

Macro Perspectives: Fri 12 Feb 2021

How hot is the market for SPACs? 

Last year was unimaginably hot - there were 248 shell company IPOs that raised over $83 billion.

We are just a little more than a month into 2021 and there has already been 135 listings and over $42 billion raised (better than 50% of the volume of last year).

These blank check companies can take up to 24-months to combine with a target company, but some come out of the gates very hot, even as they explore potential targets. The common characteristic of good performance in these SPACs is leadership - there is a who's who of powerful activist investors involved in this space.

Bill Ackman's SPAC, Pershing Square Tontine (PSTH) is up about 33%. This is pre-acquisition - still a shell.

Larry Robbins has a SPAC called Longview (LGVW). It's up ~155% - pricing in the coming acquisition of a medical technology company called Butterfly Network.

With the above in mind, if we look back at the Obama allocated stimulus (following the failure of Lehman Brothers), the institutional money followed the government money into "new technology" - Silicon Valley startups, early stage companies and private equity were the big winners.

In this next massive tranche of stimulus coming down the line from the Biden administration, it looks like the public markets will be the big winners, as institutional money flows into growth stage companies, through these SPAC structures (many related to the more capital intensive "clean energy" movement).