What is a SPAC and how popular is it?
A special purpose acquisition company (“SPAC”) is a shell corporate or blank-check listing looking for an acquisition opportunity to bring another private company listed. In short, it is led by a management team, a.k.a. a sponsor, and it raises money through an IPO before an acquisition target is identified.
Typically, money raised from an IPO is placed in an interestbearing trust account. Such money will be used when a SPAC consummates a business combination, a.k.a. a DeSPAC transaction, or will be returned to investors if it fails to seek an appropriate acquisition target and eventually liquidates. In the case a merger succeeds, the SPAC will accomplish its mission and be given a new stock code, and the acquired target will become the truly listing entity.
There were 248 successful SPAC IPOs in 2020, which is a fourfold increase of that in 2019 (59 cases) and contributed more than half of the total IPOs in the US (248/450 cases) for the year. Draftkings and Open Lendings are two of the US-based SPAC-listed super-stars of 2020, which raised US$1,664 million and US$275 million in their respective SPAC IPOs.
As for Asian investors, there have been emerging China-HK based companies seeking SPAC-listing since early 2020. In the past two months, we can see De-SPAC announcements such as the merger of Ace Global Business Acquisition Limited with DayDayCook, a company specialising in the sale and production of healthy ready-to-cook, ready-to-heat; and plant-based meat products in the PRC, which had been invested by a tycoon Peter Lee Ka Kit, Henderson Land and Towngas in previous Series C financing, and the merger of Magnum Opus with Forbes Global Media Holding Inc...
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