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In short, last year SPACs entered the financial mainstream. The investment vehicle took off last year, and by December Goldman Sachs had proclaimed 2020 to be “the year of the SPAC.” SPACs raised $73 billion in proceeds, nearly five times the amount raised in 2019 and $6 billion more than traditional IPOs. In addition to these benefits, the New York Times notes that SPAC mergers “allow retail investors to get exposure to young, innovative companies earlier than the more staid IPO process.” The process offers a quick route to a stock market listing and fewer pre-IPO rules (such as those related to revenue trends and forecasts) compared to traditional IPOs. They are essentially public shell companies that raise money for the purpose of identifying and merging with private operating companies. SPACs have been used for decades as an alternative to traditional IPOs. The rise of SPACs as alternative to traditional IPOs This article provides a summary of these concerns and outlines some important points that SPAC sponsors and their target companies should consider now. And those same financial-news followers may not know if SPACs are now experiencing rapid growth or a slump if they’re a viable alternative to traditional IPOs or an overly risky mechanism if they’re almost exclusively a US phenomenon or if there’s significant activity in other markets if regulators around the world are cracking down on SPACs or encouraging their use.
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SPAC-related trends and opinions are evolving quickly, however.