Factor Analysis of SPACs: Impact on SPACs Performance by Management Factors

Abstract

Special Purpose Acquisition Companies (“SPACs”) are shell companies formed for the purpose of acquiring an existing operating company. A typical characteristic of a SPAC is that it has no specific business plan at the time of establishment or that it is still unclear of its target company. A SPAC raises capital through an initial public offering ("IPO") process, and the investment of SPACs is related to the credibility, reputation, previous achievement, and other factors of the management team. For that reason, we want to determine whether the performances of SPACs are correlated with various factors of their founders.

In our study, we apply factor analysis to analyze and seek a correlation between the management factors and the performance of the SPACs. We have collected by far the largest SPAC data set including information about the management team of each SPAC and quantify that information into factors. The factors include education level, previous financial experience, experience heterogeneity, the average age of the team, size of the management team, and ownership of any patent. To obtain a deeper perspective of the factors' impact on SPACs' performance, we divided the SPACs into 8 sectors based on their target industries and run factor analysis over the management factors for each sector.

Keywords: SPAC, Founder, Heterogeneity, Experience, Industry, M&A, IPO, Factor, Investment

JEL Classification: G00,G11,G23,G34