SPAC IPO Waves

11 Pages Posted: 22 Oct 2020 Last revised: 9 Nov 2020

Date Written: August 25, 2020

Abstract

We examine the wave pattern of U.S. SPAC IPOs using a hand-collected data set of the entire SPAC population since their emergence in 2003. We find that both the SPAC volume and SPAC share of total IPOs are negatively related to market-wide uncertainty (VIX) and time-varying risk aversion (variance risk premium). We attribute our findings to risk-averse investors' reluctancy to invest in opaque securities. In response, the SPAC sponsor can credibly signal the issue’s quality by increasing their “skin in the game” through the purchase of additional warrants.

Keywords: IPO, SPACs, Time-Varying Risk Aversion, Uncertainty, Variance Risk Premium, VIX

JEL Classification: G14, G24, G34

Suggested Citation

Blomkvist, Magnus and Vulanovic, Milos, SPAC IPO Waves (August 25, 2020). Economics Letters, Vol. 197, 2020. DOI/10.1016/j.econlet.2020.109645 , Available at SSRN: https://ssrn.com/abstract=3686498 or http://dx.doi.org/10.2139/ssrn.3686498

Magnus Blomkvist

EDHEC Business School ( email )

58 rue du Port
Lille, 59046
France

Milos Vulanovic (Contact Author)

EDHEC Business School ( email )

24, avenue Gustave Delory
CS 50411
Roubaix, 59057
France

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