Special-purpose acquisition companies (SPACs) gained in popularity as Covid-19 had a negative impact on the Technology, Media and Telecom (TMT) IPO market. IPO activity declined sharply in March and April 2020. Many countries went into lockdown and investors faced unprecedented market volatility. However, as the market rebounded in the second half of the year, a growing number of TMT companies ditched the traditional IPO route and instead combined with SPACs in order to go public.
SPACs refer to shell corporations designed to take companies public without going through the traditional IPO process. Once SPACs have been funded, they generally have two years to find an acquisition target or risk being liquidated and see funds returned to the original investors. For the target company, the advantages include a less intrusive IPO process with fewer disclosure requirements. Such reverse merger listings have gained popularity as they emerge as cheaper and faster alternatives to traditional IPOs.
In 2020 there were 25 TMT companies that combined with these SPAC vehicles to list on the US exchanges. These listings accounted for total equity proceeds of $15.3bn. The biggest deal was MultiPlan’s merger with a SPAC, where it received $3.7bn of new equity. The next largest SPAC merger IPOs were Fisker, Opendoor, Skillz, and Nikola.
Electric vehicles have been the most popular theme in SPACs mergers
In 2020, eight electric vehicles companies merged with blank check companies to go public. The big deals included the listings of Fisker, Nikola, QuantumScape, Lordstown Motors, and Canoo. In addition, autonomous vehicle companies—Luminar Technologies and Velodyne Lidar—providing LiDAR solutions for autonomy and driver assistance—also took the SPAC route to go public.
In 2021, we expect a growing number of TMT companies to shun the traditional IPO process and, instead, go public by combining with a SPAC. Following Multiplan’s listing in 2020, other fintech companies—SoFi and Paysafe – have announced their plans to combine with a SPAC to go public.
We expect that electric vehicles companies will continue to dominate this space. We expect the listings of numerous electric vehicles startups including, Arrival, ChargePoint, Electric Last Mile, Lightning eMotors, and EVBox. In addition, the outlook looks strong for the electric vehicles startups. LiDAR sensor and software technology provider Aeva and Innoviz have announce their IPO plans where they will merge with SPACs. Indie Semiconductor, a pure-play provider of semiconductor and software solutions for automotive companies, is also going public via a special purpose acquisition company deal.