Header image

Are SPAC IPOs in the USA still OTT?

It has been an IPO market for the ages worldwide and the US has been no exception. A total of US$242 billion was raised in 751 offerings on exchanges in the first nine months of 2021, putting to shame last year's showing of US$100.9 billion.

More than half of those dollars came from (you guessed it) SPACs, which raised US$127 billion across 444 deals—more than the US$114 billion raised in garden-variety listings.

After a frenetic first quarter, regulations and lawsuits rained on the SPAC parade in the spring. This was a big turn-off for investors, who turned their attention to traditional listings, like trading platform Robinhood, or direct listings, like that of crypto exchange Coinbase.

Therefore, the dominant share of total initial equity offerings among SPACs in the US is likely to wane as 2021 draws to a close.

That's not to say SPACs are going away for good but it’s doubtful they'll be back with such a vengeance any time soon. The first quarter frenzy was a confluence of renascent market confidence, reservoirs of liquidity and investors aching to capitalize on tech's pandemic-proven growth potential. SPAC sponsors jumped at the IPO window of opportunity.

Follow my leader

Globally, IPOs accounted for 40% of all activity in equity markets, the highest share on record. Investors have clearly been hungry for new opportunities and issuers have been more than happy to oblige. Follow-ons, meanwhile, which in previous years have accounted for around 60% of issuance, represent 47% of all deal value so far this year, with convertibles taking the remaining 13%.

In the US, follow-ons have also retrenched, relatively speaking. In Q3, there were 170 such offerings from US-listed companies, marking a 23% decline from the same period last year.

But it is all relative. Back in the third quarter last year, cash-strapped businesses were lining up around the block to raise capital, with the 222 follow-ons at that time marking a record high since as far back as 2009, when the worst of the global financial crisis was still in play.

It's less a case of a follow-on shortage and more a story of IPOs gobbling up investor dollars.