Special purpose acquisition companies, or SPACs, are companies with no business plan beyond an eventual merger with or acquisition of an unspecified private company. SPACs have existed since the 1990s, but many investors are learning about them for the first time this year: SPACs have already raised more money in the first three months of 2021 than they did in all of 2020.
What is the reason for the newfound popularity of SPACs? For one thing, they offer an alternative to traditional IPOs; in fact, last year marked the first time SPAC issuances outpaced IPO issuances (248 and 209, respectively). For another, SPACs offer an easier path for companies to go public than traditional IPOs.
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