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Is the SPAC bubble bursting soon?

Is the SPAC bubble bursting soon?
March 18, 2021

The Daily Stack is a daily private market insights newsletter by PrivCo, a private company intelligence platform. Read our previous insights.
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We’ve said it before, but we’ll say it again: SPACs are having another great year. SPACs are outpacing traditional IPOs 3-1, averaging 3.1 SPACS launched per day, and it is expected that the total number of SPACs going public will outweigh IPOs for the rest of the year. However, are SPACs just another phase, and will the bubble burst?


 

  • The current average SPAC IPO size is $325.7MM in 2021. This stat compares to 2020’s SPAC IPO size average of $334.8MM.
  • In just the first three months of 2021, 264 SPACs have IPOed in comparison to 248 SPACs in all of 2020.
  • As of mid-February, 55 traditional IPOs raised $21.7BN in comparison to the 145 SPAC IPOs that raised more than $44.5BN. 
  • About 400 SPACs are still looking for companies with which to merge, but 300 of them need to find a target this year or return the money raised to investors.

But are SPACs truly profitable? 

  • Because SPACs face less scrutiny and are a fast-track to IPO, the process to IPO via SPAC takes much less time than a traditional IPO. In fact, many targeted mergers are startups that are pre-revenue but demonstrate the potential for growth. This list of startups includes businesses like EV, air taxis, fintech, sustainable energy, online payment processing, and cryptocurrency. Cryptocurrency platform eToro just announced a $10BN SPAC merger.
  • However, short-selling research firm Hindenburg Research, notorious for being wary of SPACs, has called out Nikola Motor, Lordstown Motors, and Clover Health for faking their growth potential. All three experienced drops in their stock prices post the announcement, and Clover Health reportedly is under investigation by the SEC.
  • The SEC has also put out warning letters on the risks inherent in celebrity-backed blank check companies.
  • HBR has also released an article saying the SPAC bubble will soon burst, as investors get weary.
  • The bottom line: Investors think IPOs via SPAC will still be a bigger deal in terms of money raised this year, but some are starting to question if indeed this paradigm will remain the case.
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Since last week, PrivCo has added:
502 Companies | 177 Funding Activities | 171 M&A Deals

Funding & Deal Highlights:

Weee! raises $300MM led by DST Global
Food & Beverage Retail • Equity • Freemont, CA

Clarify Health Solutions raises $115MM led by Insight Partners
Technology Services • Round C • San Francisco, CA

Appfire Technologies raises $100MM from TA Associates Management
Enterprise Software & Internet Services • Equity • Burlington, MA

Squarespace raises $300MM
Web Design & Development Software & Internet Services • Equity • New York, NY

Dutchie raises $200MM led by Tiger Global Management and acquires Green Bits
Cannabis Software & Internet Services • Round C • Bend, OR

Strive Health raises $140MM led by CapitalG
Health Care Services • Round B • Denver, CO

Unite USA raises $150MM led by ICONIQ Capital
Health Care Software & Internet Services • Round C • New York NY

Socure raises $100MM led by Accel Partners
Fraud Protection Software & Internet Services • Round D • New York, NY

Tradeshift raises $200MM led by WestRiver Group
Fintech Software & Internet Services • Equity • San Francisco, CA

Alt Platform raises $31MM led by Seven Seven Six Fund
Fintech Software & Internet Services • Round A • San Francisco, CA

Gather Presence raises $26MM
Streaming Software & Internet Services • Round A • Bellevue, WA

Apploi raises $8MM led by Underscore.VC
Healthcare Software & Internet Services • Round B • New York, NY

Woflow raises $3.5MM led by Craft Ventures
E-commerce Software & Internet Services • Seed • San Francisco, CA

Icertis raises $80MM
Finance Software & Internet Services • Round F • Bellevue, WA

Cybrexa Therapeutics raises $25MM
Drug Research Biotechnology • Round B • New Haven, CT

Hugging Face raises $40MM led by Additional Capital
NLP Software & Internet Services • Round B • Brooklyn, NY

eToro merges with Fintech Acquisition V
Cryptocurrency Software & Internet Services • SPAC • Limassol, Cyprus

Robinhood acuqires Binc
Human Resources & Employment Services • Acquisition • San Francisco, CA

Narrow Gauge Capital and Quad-C Management acquires SEI Group
Building Products • Acquisition • Atlanta, GA

Endicott Growth Equity Partners invests capital into Govspend
Government Software & Internet Services • Growth Capital • Deerfield Beach, FL

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