Growth Beyond the Year of SPACs

By Nicola Vaccaro (Bocconi University) and Ewhen Jardon Angonoa (Universidad Austral)


SPACs saw an incredible rise in popularity throughout 2020, with SPAC Initial Public Offering (IPO) proceeds to outpace the traditional IPOs’, for the first time in history. Far from over, the number and volume of SPACs in February 2021 is a monthly record high with $109 billion in transactions globally, breaking the record high established in January.

If you want to dig deeper into the beginnings of this increase in popularity, our team already identified this trend a year ago in the report Growth in Special Purpose Acquisition Companies, where a shorter analysis is made.

Table of Content


  • SPACs are blank check companies managed by sponsors that raise money in the public markets in order to merge with a private company, taking it public.

  • The process tends to be straightforward, beginning with the raise of funds, then the screening for companies and finally the merge.

Trend Overview

  • SPACs achieved prominence during 2020, as the deal volume and proceeds raised were bigger than ever before.

  • Even with some critics arguing the trend is unsustainable, SPACs volume keeps reaching record highs every month as more investors and sponsors accept the financial instrument.

Trend Drivers

  • Flexibility, haste and convenience of the SPAC process have been considered among the most relevant factors that convinced several investors to bet on this vehicle. The significant raising of private investment in public equity (PIPE) and the increasing interest from high reputable sponsors boosted the trend growth.

  • Market conditions play a key role in the SPAC development, indeed the high stock valuation that characterized the 2020 represented a golden opportunity for sponsors.

Further Trend Analysis

  • Not everyone agrees on the future development of this trend. Among those, there is David Solomon who, highlighting SPACs riskiness, reckons their growth is not sustainable in the medium term.

  • The structure has slightly changed over the past years in some SPACs since sponsors have tried to reduce possible conflicts of interest with investors. Promote and warrant coverage reductions are the most relevant changes made so far.

SPACs 101

The SPAC, or Special Purpose Acquisition Company, is a blank check company managed by a sponsor (usually a hedge fund or private equity firm) that raises money from investors through an IPO in order to merge with a company later on. The sponsor thereby essentially takes the public and gives a percentage of ownership to the SPACs’ investors. There are three main players in this process: the sponsor, the investors and the company that is taken public.

The life-cycle of SPACs is usually straightforward. Initially, sponsors create the SPAC, assign a name of their preference (e.g. Queen’s Gambit Growth Capital), and set an IPO to raise the necessary funds for the expected merger. The funds, once raised, are placed into a trust while the sponsors begin to look for a target company.

A company is usually found within a two-year period. Once the target company is identified and the details of the merger are defined, it is announced to the investors. At this point, the investors can either accept or reject the prospective company. If the deal is accepted, the merger is completed allowing the company to receive the funds raised through the SPAC and to be listed on the public markets. In addition, the SPAC’s investors take a percentage of ownership in the chosen company.

If the deal is rejected then the sponsors continue their search for a suitable target. Before the merger takes place, investors can always redeem their shares and receive their money back on a pro-rata basis, limiting the downside risk.

Figure 1. SPACs structure (UBS)