The IPO is dying

Here’s a thread on why SPACs (special purpose acquisition companies) are disrupting the IPO

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Traditional IPOs are designed to pop on the first day

It gets us tweeting. It makes the banks clients richer

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Yet this is daylight robbery

The company gets screwed out of $$$ https://twitter.com/bgurley/status/1271173082544091136?s=20

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So why are SPACs becoming a thing?

SPAC IPOs are beginning to rival traditional ones

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It comes down to incentives

All 3 stakeholders (companies, lead investors, banks) have equal or better experiences with a SPAC than a traditional IPO

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Companies get much clearer expectations with SPACS

- Security during turbulent times (like today)
- Clear pricing
- Straightforward process
 https://twitter.com/bgurley/status/1282714023440429056?s=20

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Lead investors get high upside and low downside

- Provide only ~2% of the funds
- Don’t lose much if deal falls through
- Get 20% of the SPAC for almost free if it does!

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Banks still make bank

Fees from underwriting:
- Traditional IPO = 3-7%
- SPAC IPO = ~5.5%

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If you want to learn more, check out what I wrote today https://witty.substack.com/p/back-to-spac-