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The rise of SPACs: a long-term alternative to the traditional IPO process?

  • SPACs are an alternative way for companies to access the capital market. They have experienced a boom since 2020, and in the following year 613 SPACs raised more than $160 billion in the US. However, SPACs are controversial and have been criticized for bad performance and incentive misalignments. This bachelor thesis aims to examine whether the current US SPAC boom is a temporary phenomenon or whether SPACs represent a long-term alternative to the traditional IPO process. To answer this research question, a literature review and 14 semi-structured expert interviews were conducted to explore the reasons for the boom, the advantages and disadvantages for companies seeking to go public, and the winner and losers of the SPAC process. This work shows that SPACs had already gained acceptance in the market before the boom, and it argues that SPACs are a viable alternative to the traditional IPO process for young, risky companies due to the regulatory advantages and the support of SPAC sponsors. In addition, the majority of key SPAC stakeholders are winning in the SPAC process and are likely to continue to support the market in the future. At the same time, this paper finds that the Corona pandemic was an important catalyst for the SPAC market, but that the associated reasons for the boom will probably recede. Moreover, PIPE investors will be more selective in the future and sponsors without appropriate expertise and network will have to liquidate their SPACs more often. This bachelor thesis therefore concludes that SPACs will continue to exist. However, there will be fewer and higher quality SPACs in the future.

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Author:Thomas Seefeld
Advisor:Markus Hoch
Document Type:Bachelor Thesis
Year of Completion:2022
Granting Institution:Hochschule Furtwangen
Date of final exam:2022/02/25
Release Date:2022/06/14
Degree Program:IBW - Internationale Betriebswirtschaft
Functional area:Finance & Accounting
Licence (German):License LogoUrheberrechtlich gesch├╝tzt