The Review of Financial Studies, forthcoming
50 Pages Posted: 22 Feb 2021 Last revised: 26 Jan 2023
Date Written: January 29, 2021
Going public by merging with a Special Purpose Acquisition Company (SPAC) is much more expensive than conducting a traditional IPO. We rationalize why some companies merge with a SPAC by listing the potential benefits. We analyze the agency problems that certain SPAC features address. SPAC IPO investors and deal sponsors have earned remarkably high annualized average returns, although we warn that recent deals are likely to disappoint. Public investors in the merged companies have earned very low market-adjusted returns on an equally weighted basis, although high redemptions on the worst deals have limited the amount of money that they lost.
Keywords: Special Purpose Acquisition Company, SPAC, IPO, PIPE Returns, IPO
JEL Classification: G30,G34,G24
Suggested Citation: Suggested Citation