2020 was a lightning rod for financial innovation as a flurry of firms came to market through blank-check structures known as Special Purpose Acquisition Companies (SPACs). In fact, SPACs represented 50% of U.S. IPO issuance last year, more than doubling from 23% in 2019.
In the upcoming webcast, A New ETF Strategy for the SPAC Surge, Matthew Tuttle, CEO and CIO, Tuttle Tactical Management; and Jennie Dong, Head of SPACs, NYSE, will dive deep into the world of SPACs, explaining what they are and how advisors can utilize a specialized investment strategy to gain exposure to this disruptive growth opportunity.
Specifically, the recently launched SPAC and New Issue ETF (NYSE: SPCX) is the first actively managed ETF that gives investors direct exposure to the disruptive capital markets SPACs theme.
Blank-check firms are hot as the IPO process is institutionalized, cumbersome, and inflexible, especially in adapting to the Covid-19 reality where virtual roadshows are less effective. With SPAC, there’s an alternative route for a company to go public, which can be cheaper, quicker, and more transparent. Agreements and processes are also within greater purview and control of the company.
As an alternative to the traditional initial public offering (IPO) process, SPAC IPOs have witnessed an acceleration in popularity in 2020. Through December 8, there have been 217 SPAC IPOs year-to-date, with gross proceeds exceeding $74 billion. That compares to 59 SPAC IPOs in 2019, which represented $13.6 billion in gross proceeds.
SPACs are increasingly attracting high-worth, credible sponsors. As the quality of their founders and the success of their merger companies grow, so does their integrity in the wider investment community.
Picking the winners of individual SPACs can be very difficult. The ETF structure allows investors to access the most liquid SPAC IPOs in a diversified basket. SPCX allows both financial advisors and retail investors to participate in an IPO private equity style of investing. Those are meaningful traits because many post-merger companies struggle after SPAC deals, underscoring the potential benefits of eschewing selection of individual names and embracing the fund’s active approach.
Financial advisors who are interested in learning more about SPACs can register for the Tuesday, February 23 webcast here.