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Alternative Investments – In Depth

A deeper analysis of investment trends and topics across asset classes and global markets.

November 2, 2020

Justin Lenarcic, CAIA, Senior Global Alternative Investment Strategist

Nick Sprague, CFA, Global Alternative Investment Strategist

SPAC in the saddle — The return of blank check companies

Key Insights

  • Special purpose acquisition company (SPAC) issuance has exploded in 2020, with volume in the third quarter alone exceeding total volume in 2019.1
  • A confluence of factors – including a financial system flush with cash, economic uncertainty, and maturing private equity portfolios – is collectively reinvigorating SPACs, also called “blank check” companies.
  • Investors are attracted to the potential for “liquid private equity” with reduced downside risk, an overly simplistic characterization that we believe bears caution, while sponsors and owners like the efficiency and economics versus a traditional initial public offering (IPO).
  • But SPACs are complicated and difficult to underwrite. Investors need to understand the mechanics of the IPO process, as well as key areas to focus on before committing capital.

1 Wells Fargo, Overview of Special Purpose Acquisition Companies (SPACS), October 2020.