Gabelli100 | Apr 09, 2021 | Gabelli School of Business
Special Purpose Acquisition Companies (SPACs): Wall Street’s Latest Trend
Although special purpose acquisition companies (SPACs) have been on the scene for more than two decades, in recent years they’ve become one of the hottest trends on Wall Street. They’ve captured the attention of large investors, underwriters, and celebrities and generated record-breaking amounts of capital.
In a Gabelli School Virtual Centennial Speaker Series event sponsored by the Gabelli Center for Global Security Analysis, the Museum of American Finance, and CFA Society New York, Shohana Jannat, investment banking director at the Financial Institutions Group, Peter Nesvold of Nesvold Capital Partners, and Gabelli School Professors Sris Chatterjee and N.K. Chidambaran discussed why investors are lining up for SPACs over traditional IPOs. The speakers agreed that financial flexibility, capital structure, and expert management are among the reasons they make attractive investment opportunities. Chatterjee and Chidambaran shared further research from their paper, Security Design for Non-standard IPO, the Case for SPACs.
As SPAC sponsors reap the rewards, some speculate on whether the trend will end. “I think it’s important to remember that after the Internet bubble, there was still the Internet,” Nesvold said. “After the housing bubble, there still was a housing market. It’s just that the quality bar really was forced much higher, and I think that’s what we’re going to see here.”