FEATURE
SPACS ARE HELPING LEVEL THE PLAYING FIELD AND ALLOWING MORE COMPANIES TO GO PUBLIC WITHOUT THE EXTENDED PAPERWORK , FEES AND RISK .
First created in the 1990s , SPACs were not very popular to start with and blue-chip investors tended to choose a more traditional route .
The recent surge in SPACs has been mainly down to seeing more formed by bluechip private equity firms , banks and entrepreneurs and being seen as a viable liquidity option .
So how does this uptake in SPACs enable business growth ? In a short answer , it gives companies more access to capital . Small and midsized companies are not always ideal to go down the traditional IPO route but by merging with a SPAC they can retain a stake in their business and access capital that would normally not be available to them .
Less uncertainty is another plus for the SPACs route . With US stock markets fluctuating , traditional IPOs leave companies scrambling to float on the market at just the right moment . There is also the issue of setting the price correctly , as if it is set too low , companies risk losing big money . Alongside the need for certainty , especially in these troubled times , is a need for flexibility .
As we enter new markets driven by the economic unrest of the pandemic , companies will need to retain some semblance of flexibility to add to their resilience and longevity . SPACs present companies with the flexibility to negotiate other terms and the transition can be structured to bring in additional funds through a private investment in public equity .
The uptick in these investment vehicles is being driven by a new generation of management teams and sponsors , which has resulted in higher
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