Katten’s 2021 SPAC Survey, which is baed on the results of one poll of 80 investment professionals in March and another of 100 investment professionals in May, has found that investors who participated in at least one SPAC transaction – as either sponsors, investors, advisors or underwriters – say they expect SPAC activity to increase at least through 2022.
Katten’s 2021 SPAC Survey, which is based on the results of one poll of 80 investment professionals in March and another of 100 investment professionals in May, has found that investors who participated in at least one SPAC transaction – as either sponsors, investors, advisors or underwriters – say they expect SPAC activity to increase at least through 2022.
When Katten conducted its first poll, 75 per cent of investors who had participated in at least one SPAC transaction said they expected SPAC activity to increase through next year. Despite an underwhelming second quarter, Katten’s second poll revealed continued, undaunted optimism: 72 percent of investors who have participated in a SPAC transaction agree (with 44 per cent of those strongly agreeing) that SPAC IPO activity will be strong through at least 2022. Not surprisingly, those who have not participated in a SPAC are more skeptical — just 32 per cent feel that activity will be strong through 2022.
“Investors expect that the conditions that have fuelled SPACs’ growth over the last few years will continue to exist for the foreseeable future,” says Brian Hecht, a partner in Katten’s New York office. “There will be some ups and downs along the way, including the relative slowdown in SPAC IPOs we’re seeing now, for a variety of reasons, including some pullback from the stock market run-ups that SPACs had been experiencing, recent pronouncements from the Securities and Exchange Commission (SEC) and perhaps just a perception that it’s an appropriate time for the SPAC market to catch its breath after the frenetic activity in the first quarter. But it appears, more generally, that the momentum fuelling the SPAC market is sustainable.”
The survey also found that SPAC transactions compare favourably to traditional IPOs because they offer a simpler process. SPAC issuers have additional flexibility with certain disclosures in SPAC transactions as compared to traditional IPOs, creating free space for SPAC target companies to tell their stories to investors — an advantage that 74 percent of respondents cite for SPAC deals. That can be especially advantageous for early-stage companies in industries like technology and life sciences, which often do not yet have the established financial track records that IPO investors typically look for.
“The market for SPACs has cooled for the moment, but it hasn’t gone away — because investors continue to see SPACs as valuable places to deploy capital,” says Mark Wood, partner and national chair of Katten’s Securities practice. He adds: “We don’t know when SPAC IPO activity will pick back up, but we are optimistic that it eventually will, even if not at the rates we saw in 2020 and early 2021.”
