World’s biggest SPAC deal highlights the boom in blank-check companies
Bloomberg Market Specialists Kai Blatnicky, Steven Gee and Jim Simmons contributed to this article. The original version appeared first on the Bloomberg Terminal.
Background
Special purpose acquisition companies (SPACs), colloquially known as blank-check companies, boomed in 2020 with a record-breaking $83.3 billion raised in the U.S. Moreover, they have enjoyed an even more auspicious first quarter of 2021, with nearly $100 billion raised from 298 SPAC launches amid a surge of celebrity and retail investors eager to jump on the latest investing trend.
Effectively corporate shell companies, SPACs offer a backdoor to the uncertainty and regulations of the traditional IPO route by raising money from investors first before merging with a pre-existing private company. This allows companies to make investment pitches based on forward-facing financials, catering to companies in young markets that don’t yet have established business models.
The issue
April saw Singapore-based tech giant Grab Holdings Inc. launch the biggest SPAC deal to date. Following a merger with US-based Altimeter Growth Co., the ride-sharing and food delivery unicorn is expected to go public with a $40 billion valuation, up from $16 billion earlier this year. In addition, Grab has raised more than $4 billion from investors as part of the largest U.S. equity offering from a Southeast Asian company.
This announcement comes amid increased scrutiny from regulators around the SPAC asset class, with the U.S. Securities and Exchange Commission raising red flags around the potential risks of investing in these blank-check companies. SEC guidance stated that warrants issued by SPACs to early investors might be considered liabilities, rather than equity instruments, for accounting purposes.
The restatement filings required by this new issuance market have slowed the breakneck pace of SPAC listings and muted public enthusiasm. The Grab listing proves, however, that the right deals still contain immense upside potential.
Tracking
To track SPAC issuance, performance and deals, use the Equity Offerings function.
Bloomberg users can also use a pre-populated SPAC Tracker worksheet to find key information, such as notable managers, targets and details of their IPO deals.
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