Global funds are pouring into the SPAC market at a rapid rate. In less than three months since the beginning of the spring of this year, the transaction volume of special purpose acquisition companies (SPAC) has soared to US$170 billion, setting a record high and surpassing the US$157 billion of last year.
SPAC has become a popular alternative to IPOs for startups, because it can go public quickly with less regulatory review, and it can also bring huge returns to Wall Street and Silicon Valley investors.
According to Dealogic data, about 5 new companies are established every day, and nearly 400 SPACs are seeking to list companies. The companies that SPAC deals this year are mainly from the automotive, software and aviation sectors.
In addition, US SPACs have raised US$64.2 billion through IPOs so far this year, accounting for 76% of the total market IPO funds raised. Investors have poured into SPACs mainly because they hope to obtain higher returns through growth stocks.
However, due to the rising U.S. Treasury yields, the SPAC share price has recently fallen. Because the market is concerned that its valuation is too inflated, the IPOX SPAC index, which tracks the performance of listed SPACs, has plummeted by more than 12.5% in the past month, while the S&P 500 index fell 2.4% during the same period. .
Easterly Alternatives’ SPAC portfolio manager Evan Ratner said that this situation will become more intense, and unless the yields on public debt continue to fall, the volatility will continue.