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SPACs: a 'guaranteed' return to the investor?

Oil & Gas Financial Journal

In light of the new guidelines, SPACs have matured tremendously. Whereas early SPACs raised roughly $50 million to $100 million, capital raised today can reach anywhere from $300 million up to $1 billion. "There is a tremendous amount of capital being raised," reiterated Wotczak.

The sole purpose of the SPAC is to locate an acquisition target. A SPAC will start with a sophisticated management team, perhaps a retired Fortune 500 executive. Sole purpose is to go out and find an acquisition target. Wotczak believes the process is 'more efficient and much cleaner' than buying a public company and merging it because the management is focused on finding the appropriate target and not simultaneously running a business.

Last year AMEX raised over $10 billion from 50 SPAC transactions. "Fifty is a very big number," said Wotczak. These 50 transactions represented 25% of the overall US IPO market. "It's become a very significant part of capital raising and conversation of banks," he continued. To his knowledge, there isn't a large bracket investment bank that has not become involved in SPAC process. Bank of America, Deutsche Bank, CitiGroup, and Goldman Sachs have all filed applications. To Wotczak this "ratifies the overall process and program of SPAC market."