Special Purpose Acquisition Companies (SPACs) have become impossible to ignore, comprising nearly half of all IPOs in 2020 and raising over $35 billion this year to-date. SPACs raise money in an IPO, then place it in a trust while the sponsor searches for a business or businesses to acquire, typically within a 24-month period following the IPO, effectively creating a “backdoor” IPO for otherwise private companies.
Of note in 2020, many recent SPACs have a specific mandate to target matters related to the “energy transition,” such as clean tech, green hydrogen, electric/autonomous vehicles, battery technology, etc. Many of these energy transition targets have little revenue or are even pre-revenue but are nearing commercialization and project significant revenue going forward, using SPACs as a way to secure the financing necessary for their capital-intensive projects to reach the market.
A key trend to watch through the remainder of 2020 and into 2021 will be the performance of these SPACs following their “de-SPACing,” or the consummation of their business combination, and whether future SPACs continue to focus on the energy transition (including targeting more established businesses).
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