Is the 2020 SPAC boom an echo of the 2017 ICO craze? – ProWellTech
I wanted to write an essay on Microsoft and TikTok today, because I was actually a full-time journalist who was concerned with the software giant when he hired Satya Nadella in 2014. But everyone has already done so and, frankly, there is a more urgent financial topic for us to analyze.
Let’s take a minute to take stock of the SPACs (acquisition companies for special purposes), which have risen sharply to new importance in recent months. Also known as blank check companies, SPACS are companies that are sent to the public with a lot of money and the reputation of their supporters. So, they combine with a private company, effectively allowing still private companies to make public with much less hassle than a traditional IPO.
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And less control, which is why historically SPACs have not been the way forward for companies of the highest quality; a look at historical data does not paint a great picture of post-IPO performance.
But that historical stigma is not stopping a flow of SPACs that make private companies public this year. A series of SPACs has already taken place, which we should have observed more in Q1 and Q2.
Anyway, better late than never. This morning, let’s take a look at two new SPAC news: the Lordstown Motors electric truck company that merges with a SPAC to go public, and the fintech Paya company that goes public through FinTech III, another SPAC.
We will see that in the hot sectors there is a large capital hunt for business of any kind. How the high liquidity boom will last in the long term is unclear, but what is clear today is that where caution is lacking, the hunt for yield is more than willing to intervene.
Electric vehicles like SPAC nirvana
The boom in the value of Tesla shares has lifted all electric vehicle (EV) boats. The value of historically troubled public EV companies like NIO has returned, and private companies in space have been hot for SPACs as a way to quickly publicize and cash in on investor interests.