Although special-purpose acquisition companies (SPACs) weren’t particularly well-known as recently as two years ago, there’s no doubt that 2020 was their breakout year.
Compare the 240 SPACs that raised over $80 billion in 2020 to the 59 SPACs the year before.
It stands to reason, and WGP Global believe, that 2021 and 2022 will see a huge SPAC growth, particularly in London as the financial hub seeks parity with its New York counterpart.
It’s worth remembering that a SPACs shelf life is limited to between 18 and 24 months, during which time money raised must be invested in an IPO.
If it isn’t, then shareholders are well within their rights to redeem their shares, meaning IPO funds will be depleted.
So, what industry SPAC IPO trends can be expected in 2021?
Bear in mind that quite a large number of SPACs are formed with a more general industry focus and as little as 20 percent have a specific industry in mind when deciding where to invest IPO funds.
What is often found is that either the SPAC sponsor or management team have expertise in a particular industry or area, and focus is directed there.
SPAC Investment Trend #1 – Tech Companies SPAC Investment
WGP Global have already identified a move towards technology companies where SPACs are concerned.
7 Tech Spac Company Investment Opportunities (Areas)
- Fintech SPAC investment
- Medtech SPAC investment
- Biotech SPAC investment
- Cleantech SPAC investment
- EV (electric vehicles)
- Industrial SPAC investment
- Government tech SPAC investment
over a quarter of all new SPACs are tending to be in these areas and/or financial services, consumer services, energy, health care and life science.
Why in those areas specifically?
Often, substantial capital is required to bring these to market.
Given that access to liquidity is simpler when using the SPAC as a vehicle, it’s a very attractive proposition for the companies that are best positioned to take advantage.
Despite reticence in certain quarters, for example with companies that prefer a traditional IPO rather than SPAC route, there are a large volume of SPACs hunting for targets and it is WGP Global’s contention that this is set to continue through the year.
SPAC Investment Trend #2 – More London SPAC Investment
US SPACs surged ahead of their UK counterparts in 2020, however, the balance should be restored by the end of 2021.
- With no shareholder approval for the acquisition required in the UK at the point of De-SPACing, thereby saving upwards of three months over a New York listed SPAC, companies will begin to think long and hard as to where they intend to list.
- Other points in London’s favour are a reduced execution risk coupled with no associated protracted timetable.
- US SPACs had offered more flexibility, but that’s likely to change soon.
- Previously, the classification of a London-listed SPAC as a reverse takeover could result in suspension of trading – not lifted until such time as an FCA-approved prospectus is published.
As a result of that, investors who didn’t approve were still locked in for a protracted period.
Despite this, US SPACs are known to still be targeting businesses outside of the country, which is likely to drive even more SPAC activity in the UK too.
Even if part of the US SPAC model needs to be replicated to build confidence and to mitigate investor risk, London can feel confident in its positioning over the coming year to 18 months.
London Stock Exchange sources have suggested privately that UK SPACs can be structured as in the US, simply because there aren’t rules in place to prevent that from happening.
If part of the reason for the slower uptake in London is purely down to process, then the LSE have it within their power to spark a SPAC revolution, something WGP Global would wholeheartedly welcome and are ready for.
Indeed, it’s WGP Global conclusion that the processes now being put in place for UK SPACs are designed to stop them listing elsewhere.
It’s high time London took the fullest advantage of the SPAC boom and the LSE is continuing to explore the possibilities in order to entice more SPACs to list in the UK.
There is a commitment to provide a more flexible regulatory framework in order to bypass any obstacles that SPACs may believe are stopping them from listing in London already.
Increased demand from the sponsor side mean there’s a huge market for SPACs in London, and WGP Global are ready to create some notable deals.
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