SPAC 2021 Outlook

Many have called 2020 the year of the SPAC. Unsurprising given the explosion in SPAC issuance last year (around $80bn from 237 deals in 2020, a significant rise on the approximate $13.5bn from 59 deals in 2019). The SPAC phenomena has literally burst onto the scene, with 2020 alone seeing more capital raised than over the last decade combined. In 2007, at the previous SPAC peak, they comprised about 14% of the market; in 2020 SPACs accounted for around 50% of all IPO issuances.

However, a close look at market conditions, macroeconomic factors and the current state of the SPAC space, indicates that 2021 could well see further growth in this dynamic area. Indeed Goldman Sachs have suggested that more than $300bn worth of SPAC stock could be issued over the next two years. If we consider what drove the SPAC growth in 2020, we can see why it might continue.

Firstly, in a low interest environment, investors are searching for yield, and it doesn’t cost them very much to commit their capital to a SPAC until a deal is announced. Their downside is mitigated as their cash is stored in treasury bills until the SPAC identifies a target company. The investor can then choose to withdraw their money or go forward into the merger.  The flexibility and safeguards make SPACs a good option in the current climate of low interest rates and high equity valuations. These factors seem unlikely to change in the coming year as the economy recovers from the impact of Covid-19 and retail investors continue to multiply and seek early-stage business opportunities.

Secondly, SPACS continue to be sponsored by experienced backers with track records of industry success. Michael Klein, Bill Ackman, Chamath Palihapitiya and private equity firms like Solamere Capital, Apollo Global, TPG Capital – their involvement in SPACS lend credibility and confidence to the SPAC space. Combined with the structural safeguards and transparency that are perhaps even greater with SPACs than IPOs, the market seems far from waning.

According to BTIG there are 210 SPACs currently searching for an appropriate target company, with time limits of 18-24 months. Charlie Ergen, for example, chief executive at Dish Network, is creating a new SPAC, named CONX, to raise $1 billion to fund acquisitions in the technology, media and telecom sectors. Space company Momentus is set to go public through a Stable Road’s SPAC with close to a $1 billion valuation. We believe that these examples, combined with the raw data, suggest continued growth in the SPAC sphere as we move into 2021.

1 “Will SPAC popularity burn out in 2021?” December 28, 2020.

2 “2020 Has Been the Year of SPAC IPOs: Here Are the Prominent 4,” Sanghamitra Saha, December 28, 2020. 

 3 “Goldman Strategists Say SPACs May Spur $300 Billion M&A Activity,” Joanna Ossinger, December 14, 2020. 

4 “The 2021 outlook for the booming SPAC market and traditional IPOs,” Bob Pisani, December 7, 2020.

 5 “2020 Has Been the Year of SPAC IPOs: Here Are the Prominent 4,” Sanghamitra Saha, December 28, 2020.