SPAC IPO Waves
11 Pages Posted: 22 Oct 2020 Last revised: 9 Nov 2020
Date Written: August 25, 2020
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: Suggested Citation