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SPACs as an Asset Class

Stefan Lewellen

London Business School

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.

Number of Pages in PDF File: 45

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

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Date posted: October 16, 2008 ; Last revised: March 25, 2009

Suggested Citation

Lewellen, Stefan, SPACs as an Asset Class (March 24, 2009). Available at SSRN: https://ssrn.com/abstract=1284999 or http://dx.doi.org/10.2139/ssrn.1284999

Contact Information

Stefan M. Lewellen (Contact Author)
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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