Special Purpose Acquisition Companies (SPACs) have seen a rapid surge in the IPO market in 2020, being a popular, and competitive, investment choice for the likes of private equity and real estate fund managers, sovereign wealth funds and investment banks.
SPACs are newly formed companies raising cash in an IPO to fund the merger or acquisition of a target private company, with a defined criteria. Once merged, the private company becomes public. This process is quicker than traditional IPOs and gives more price certainty to the private company. The attraction for investors is that SPACs are run by some of the world’s most successful entrepreneurs and former corporate executives.