Another week and the biggest story in a sea of big stories continues to center on SPACs, these blank-check companies that raise capital through IPOs expressly to acquire a privately held company and take it public. But some industry watchers as starting to wonder: Is the party just getting started, with more early guests still trickling in? Have we reached the party’s peak, with the music still thumping? Or did someone just quietly barf in the corner, a sure indicator that it’s time to grab one’s coat and leave? It certainly feels like things are in full swing.
Today, B Capital, the venture firm co-founded by Facebook cofounder Eduardo Saverin, registered plans to raise a $300 million SPAC. Mike Cagney, the fintech entrepreneur who founded SoFI and more recently established Figure, a fintech company in home equity and blockchain space, raised $250 million for his SPAC. Even Michael Dell has leaped, with his family office registering plans to grow a $500 million blank-check company this afternoon.
Altogether, according to Renaissance Capital, 16 blank-check companies raised $3.4 billion this week, and new filers continue to flood into the IPO pipeline, with 45 SPACs submitting initial filings this week (compared with ten traditional IPO filings). Perhaps it’s no wonder that we’re starting to see headlines like one in Yahoo News just yesterday titled, “Why some SPAC investors may get burned. Interestingly, such headlines could gum up the SPAC machine. So argues Ivana Naumovska, an assistant professor at INSEAD, in a new Harvard Business Review piece titled, “The SPAC Bubble is About to Burst.
Naumova points to research showing that it will become increasingly widespread when more people adopt a practice due to growing awareness and legitimacy. Yet when it comes to something more controversial — which it could be argued that SPACs are — outsider concern and skepticism also increases as the practice becomes more widely used. Thus are born headlines like that one in Yahoo Finance.