Interdisciplinary Team of Firm Attorneys Analyze Data Provided by PitchBook, Investigate Surge of Interest in Special Purpose Acquisition Company (SPAC) Vehicles

Mintz has published an in-depth report, “Breaking Down the SPAC Surge: A Review of Key Trends & Issues Defining the Phenomenon,” which analyzes data provided by PitchBook and explores the recent sharp rise in capital raised by SPACs and SPAC merger activity, as well as implications for capital markets and private companies, key risks and opportunities inherent to SPACs, and how these financing vehicles could evolve.

A faster, alternative route to initial public offering (IPO), SPACs continue to dominate headlines in the financial press as they consistently outstrip traditional IPO registrations after a staggering surge of formation in the past 14 months. According to PitchBook data, between 2019 and 2020, there was a 536 percent increase in the amount of capital raised by SPACs. In 2021 thus far, there has been little to no slowdown in the pace of funds pouring into SPACs, with over $50 billion raised.

While impressive, record formation rates are not the only cause for discussion, and Mintz analysis of datasets and research uncovered the following key findings:

• A fundraising frenzy: nearly $125 billion raised across hundreds of SPACs over the past 14 months;
• 2020 saw 123 mergers with SPACs announced or closed for an aggregate $59.3 billion, representing a significant portion of all SPACs over the past few years;
• Drivers of the SPAC boom: strong investor demand, record asset prices across much of equities, significant private investor dry powder, and a large number of potential target private companies;
• Increased usage by sustainability-focused businesses implies an establishment of SPACs as a potentially better-suited avenue of liquidity and capital access for capital-intensive, longer-term company models; and
• Important considerations for SPAC sponsors and targets include flexibility in bases of valuation, agreeing to a form of merger agreement in the letter of intent, and operating control and governance alignment.

In addition to analyzing fundraising and merger activity, the Mintz team reflected on the longevity of SPACs as a mechanism for liquidity for private companies and additional means of exposure for investors, and also posited on the eventual evolution of SPACs, which will likely involve adaptations to address key areas of litigation and regulatory risk.

“Our team is excited to share this timely and informed analysis on the surge in SPACs, as the market continues to boom, and we thank PitchBook for their critical partnership and data,” said Michael Fantozzi, Managing Member of Mintz’s Boston Office and Chair of the firm’s Corporate, Tax, Private Client & Immigration Division. “Mintz continues to be at the forefront of these transactions, particularly in the life sciences, health care, and sustainability sectors, and the firm is well-equipped to advise clients on all stages of the SPAC lifecycle from formation to IPO to M&A, as well as de-SPAC transactions and securities litigation.”

Mr. Fantozzi, along with Mintz Member Jeffrey Schultz, Member and Chair of the firm’s Energy & Sustainability Practice Tom Burton, Member and Co-chair of the firm’s Securities Litigation Practice Jack Sylvia, and Associate Patrick McDonough collaborated on content for this report.

Mintz is recognized as a pioneering firm in the SPAC space, having handled the first New York Stock Exchange SPAC transaction, advised on the first deal with over $100 million in private investment in public equity (PIPE), and created alternative investment market (AIM) SPACs. In recent months, the Mintz team has worked on many SPAC deals for multibillion-dollar value companies, and its deep industry experience in life sciences, health care, energy & sustainability, and technology is aligned with the sectors where SPACs are most prominent. Mintz’s SPAC Practice is interdisciplinary and includes attorneys from the firm’s securities litigation team who regularly advise on corporate disclosures, financial projections, redemption of SPAC shares, and risks related to the de-SPAC process.

Please click here to learn more about Mintz’s SPAC Practice.

Download the full “Breaking Down the SPAC Surge” report here.