Pershing Square Tontine Holdings (PSTHU) raised $ 4 billion and was down 6.5% yesterday, making it the largest Special Purpose Acquisition Company (SPAC) ever made public. It is the last milestone in a record year for SPACs.
Milestones of SPAC 2020
- The largest SPAC ever released: Pershing Square Tontine.
- Largest SPAC Merger Announced: Churchill Capital III (NYSE: CCXXU) and MultiPlan ($ 11 billion).
- SPAC’s First Initial Public Offering of Common Stock: Therapeutic Acquisition (NASDAQ: TXAC).
- Best First Day Pop for a SPAC: Therapeutic Acquisition (TXAC; + 20% pop)
- Most SPAC earnings collected in a year: $ 17.1 billion, with five months to go.
- Biggest quarter of all revenue (tied for most deals): 2Q20, 24 SPAC and $ 7.2 billion.
- On track for a record year by number of deals in 2020.
- More Companies Choose SPAC Listings Over IPO
So far this year, 48 SPACs have raised $ 17.1 billion, representing 40% of all dollars raised in the 2020 IPO market. More SPACs have been made public than any other sector, leading healthcare. (45 IPO; $ 11.1B), technology (14; $ 4.0B), finance (7; $ 2.2B) and industrial (6; $ 4.3B). In some cases this year, SPACs have set records, only to be broken months or weeks later. Churchill Capital Corp III became the largest SPAC after its $ 1 billion February IPO, now dwarfed by Pershing Square Tontine. Acquisition of Panacea EcoR1 (NYSE: PANAU) had the highest SPAC pop (+ 13%), prior to the therapeutic acquisition of RA Capital the following week.
SPAC activity has been trending higher for years, but high-profile success stories like Virgin Galactic (SPCE; $ 25.54), DraftKings (DKNG; $ 37.75), and Nikola (NKLA; $ 36.57) have been a driver. behind some of the recent frenzy. SPAC proponents claim that a negotiated M&A deal is safer than the IPO process, but these deals also reinforce the idea that SPACs can go public with a unique set of quality assets, including private equity companies. the moon or high-profile names that traditional IPO investors could normally avoid. Recently, even traditional IPO candidates like Biotech Immatics (IMTX; $ 10.73) and auto-tech Velodyne Lidar (GRAF.U; $ 19.00) agreed to SPAC mergers, while the privately owned MultiPlan (CCXXU; 11.50) plan was will make public through $ 11 billion The SPAC merger further consolidates this route as a viable IPO alternative.
SPACs have begun to attract long-term investors, though historically hedge funds eagerly bought SPAC units for $ 10, sold the redeemable common stock for roughly the same price, and withheld the potential potential warrant on an acquisition. SPACs can be very lucrative for founders, who retain a significant share of equity, along with various advisers, attorneys, and bankers.
For investors after the acquisition, SPAC’s returns have been a mixed bag. Most SPACs that completed acquisitions in 2020 operate below the issue (13/22), which is also true for SPACs that completed acquisitions in 2019. That said, space is possibly maturing, both in terms of the quality of the companies that are beginning to be acquired and the management teams that form them. An encouraging sign: Pershing Square sponsor Tontine will not make money unless public investors do.
Original publication
Editor’s Note: The summary bullets for this article were chosen by the editors of Seeking Alpha.
