- A special-purpose acquisition company, or SPAC, is a firm that raises money through an IPO with the sole purpose of finding another business to later buy.
- This type of firm, also known as a "blank-check" company, is having a moment on Wall Street.
- It used to be the case that only startups that were challenged in some way would merge with a SPAC, an event called a "de-SPACing." Now, hot startups like Opendoor and Nikola are piling into the trend.
- Here are the most 10 valuable SPAC deals since 2015.
- Visit Business Insider's homepage for more stories.
There was a time, not too long ago, when a startup founder would consider selling their business to a special-purpose acquisition company, or SPAC, only as a last resort.
Such a sale would signal that the founder couldn't pull off any better move, because the business had failed to attract a quality buyer, or it didn't have the financial discipline to float an initial public offering on the public markets on its own.
The unpleasant alternative that remained was an acquisition by a SPAC, or "blank-check company," that has no operations of its own. This type of firm raises funds through an IPO for the sole purpose of buying another business. As the two companies merge, the publicly traded SPAC effectively takes the private business public, without the pomp and cork-popping that usually comes with an IPO — or the dreaded scrutiny and negotiations over price.
But the traditional path to the public markets caved this year amid a pandemic and a recession. Many companies delayed their IPO plans until the market swings subsided, and some looked for alternative routes to Wall Street.
Almost overnight, selling to a blank-check company lost its stigma and became a lot more attractive.
And then the SPACs proliferated.
About 110 blank-check firms have raised more than $40 billion on the public markets, according to the website SPAC Research. That's up from the 59 SPACs that pulled in less than $14 billion last year. And everyone who's anyone in the tech and finance worlds seem to have launched their own SPAC from billionaire LinkedIn founder Reid Hoffman (partnered with Zynga founder Mark Pincus); to Zillow and Hotwire founder Spencer Rascoff, to billionaire hedge-fund manager Bill Ackman.
The National Venture Capital Association held a webinar on the blank-check boom last week. Its presentation had a slide on the biggest companies that went public through a SPAC in the last five years, ranked by valuation.
The list shows that going public through a blank-check firm isn't just for the unsexy or troubled companies anymore. Hot startups like Opendoor, Clover Health, and electric automaker Nikola are among the firms piling into the craze.
Here are the 10 largest 'de-SPACings' since 2015
We included the valuation of the merged business in parentheses.
- United Wholesale Mortgage — merged with Gores Holding IV in September 2020 ($16 billion+)
- MultiPlan — merged with Churchill Capital III in July 2020 ($11 billion+)
- Vertiv — merged with GS Acquisition in December 2019 ($5.3 billion+)
- Advantage Solutions — merged with Conyers Park II in September 2020 ($5.2 billion+)
- Opendoor — merged with Social Capital II in September 2020 ($4.7 billion+)
- Clarivate Analytics — merged with Churchill Capital in January 2019 ($4.2 billion+)
- Vivint Smart Home — merged with Mosaic Acquisition in September 2019 ($4.1 billion+)
- Alta Mesa & Kingfisher — merged with Silver Runn II in August 2017 ($3.8 billion+)
- Clover Health — merged with Social Capital III in October 2020 ($3.7 billion+)
- Nikola — merged with VectoIQ in March 2020 ($3.3 billion+)
Source: NVCA; DealLogic; company filings
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