SPACs

The Review of Financial Studies, forthcoming

50 Pages Posted: 22 Feb 2021 Last revised: 26 Jan 2023

See all articles by Minmo Gahng

Minmo Gahng

Cornell University - SC Johnson College of Business

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

Donghang Zhang

University of South Carolina

Date Written: January 29, 2021

Abstract

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

Gahng, Minmo and Ritter, Jay R. and Zhang, Donghang, SPACs (January 29, 2021). The Review of Financial Studies, forthcoming, Available at SSRN: https://ssrn.com/abstract=3775847 or http://dx.doi.org/10.2139/ssrn.3775847

Minmo Gahng

Cornell University - SC Johnson College of Business ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.minmogahng.com

Jay R. Ritter (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://https://site.warrington.ufl.edu/ritter

Donghang Zhang

University of South Carolina ( email )

1014 Greene Street
Darla Moore Sch
Columbia, SC SC 29208
United States
8037770242 (Phone)
29208 (Fax)

HOME PAGE: http://https://sc.edu/study/colleges_schools/moore/directory/zhang_donghang.php

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