Each raised millions of dollars, respectively, via a special purpose acquisition company, or SPAC.
What are SPACs?
As such, SPACs can be seen as a faster, more efficient path to going public.
How do SPACs work?
This unit includes one share of common stock and a warrant to purchase more stock at a later date.
The funding raised is put into a trust while the SPAC finds a target company to merge with.
The SPAC typically has 18 to 24 months to identify a target company and complete an acquisition or merger.
How popular are SPACs?
There were seven SPAC IPOs in 2010, according toStatista; in 2020, there were 248.
And as of Sep. 1, there have already been 419 this year.
SPACs raised a staggering$100 billion in IPOs– up from $50 million in 2010.
Why did SPACs get so hot in 2020?
Then, the COVID-19 pandemic hit, precipitating a major market crash and causing great uncertainty.
The Federal Reserve took action, flooding the market with capital and helping the stock market to recover quickly.
SPACs offered a much more efficient fast track to going public.
As such, private companies flocked to them.
“And then, it was kind of a circular reference,” Galley says.
