SPACs as an Asset Class

45 Pages Posted: 16 Oct 2008 Last revised: 25 Mar 2009

See all articles by Stefan Lewellen

Stefan Lewellen

Pennsylvania State University - Department of Finance

Date Written: March 24, 2009


Special Purpose Acquisition Companies, or SPACs, have grown into one of the largest segments of the U.S. IPO market, raising more than $20 billion in gross proceeds since 2003. SPACs bear a strong resemblence to private equity funds, yet are largely free of the selection and survivorship biases that are often present in private equity datasets. I find that a portfolio of SPACs resembling "public LBOs" has a market beta near unity despite an average leverage multiple of nearly two, yielding new evidence regarding the systematic risk of leveraged buyouts. I also find that SPACs' highly predictable lifecycle yields highly predictable returns, with a monthly four-factor portfolio alpha of approximately 2% following the announcement of an acquisition and -2% after an acquisition has been completed. Finally, I provide evidence of a persistent discount in SPAC prices prior to the completion of an acquistion, which I attribute to fragmentation within SPACs' unique shareholder base.

Keywords: Special Purpose Acquisition Company, SPAC, Blank Check Company, BCC, Private Equity, Leveraged Buyout, LBO, Initial Public Offering, IPO, Shareholder Voting

JEL Classification: G12, G14, G34

Suggested Citation

Lewellen, Stefan, SPACs as an Asset Class (March 24, 2009). Available at SSRN: or

Stefan Lewellen (Contact Author)

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

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