SPACs are publicly-traded shell companies with the intention of buying another company or companies. SPACs are called “blank check” companies because to begin with, there is no business. Some of the more popular SPACs recently have been DraftKings, Nikola and Virgin Galactic.
According to Bloomberg, the first recorded listing of a blank-check company goes back to 1993. In 2007, $6 billion was raised through SPACs and in 2020, $83 billion was raised through SPACs. But through the first month of 2021, 16 deals totaling $12.5 billion have been raised according to Bloomberg.
So what’s up with he love affair with SPACs. Well during the volatility of the first half in 2020, we saw many companies that were scheduled to go public, put those plans on hold. During times of uncertainty, IPOs become risky. But going the SPAC route, companies have a bit more control of the outcome. And with cheap US dollars in the air, SPACs are an opportunity for higher returns right off the back. And now that SPACS have a proven track record, they are the IT THING on Wall Street right about now.
Video Source: https://www.youtube.com/c/YahooFinance/videos