Special Purpose Acquisition Companies

“"SPACs

Names of the authors: Minmo Gahng, Jay R. Ritte

r, and Donghang Zhang
Date of publication: January 29, 2021
Motivation behind the paper
Why the authors decided to conduct
this study?
1. To explore the reasons why SPACs have
become so popular.
2. And examine their impact on the
traditional IPO market.
Objectives of the paper
What is the impact of SPACs on the traditional I
PO market?
 What are the key differences between SPACs
and traditional IPOs?
What are the advantages and disadvantages of
investing in SPACs?
Literature review
1. "Special Purpose Acquisition Companies:
An Introduction" by Michael D. O'Sullivan
and Damaris P. Rose
2. "The SPAC Comeback: An Empirical Analysis" by Cr
aig Doidge, G. Andrew Karolyi, and Rene M. Stulz
3. "Special Purpose Acquisition Companies (SPACs): A
New Financing Technique and a New Source of Deal
Flow" by David J. Greene and David S. Lipton
4. "SPACs: A Boon for Private Equity?" by Matthew D.
Cain and Steven Davidoff Solomon
Literature review
 Previous studies on SPACs have explored their
history, structure, and performance.
 One of the most important studies found that
SPACs have become increasingly popular as a way for c
ompanies to go public, and that they offer
several advantages over traditional IPOs.
 Other studies have explored the regulatory requirements
for SPACs, the types of companies that
are typically acquired by SPACs, and the performance of
SPACs in the market.
Comparing SPACs and Traditional IPOs
SPACs and traditional IPOs have several similariti
es and differences in terms of structure, regulation,
underwriting, and other factors. Here's a comparis
on and contrast of these two methods of going pub
lic, along with their respective advantages and dis
:advantages
Comparing SPACs and Traditional IPOs
Structure:
SPACs are investment vehicles created with the
intention of acquiring or merging with another c
ompany within a specific period of time.
Traditional IPOs involve a company going publi
c through the sale of shares to the public.
:
Comparing SPACs and Traditional IPOs
Regulation:
SPACs are subject to less regulation than traditio
nal IPOs, but still have to meet certain requirem
ents, such as filing with the SEC and disclosing
information to investors.
Traditional IPOs have more regulatory requirem
ents, such as detailed financial reporting, and are
subject to more scrutiny.
Comparing SPACs and Traditional IPOs
Underwriting:
SPACs do not require an underwriter, but they d
o require a sponsor who provides capital and ex
pertise.
Traditional IPOs are typically underwritten by in
vestment banks, who help the company price an
d sell its shares.
Comparing SPACs and Traditional IPOs
:Advantages of SPACs 
Speed: SPACs can go public faster than traditional IP 
Os because they do not require as much regulatory scr
.utiny
Flexibility: SPACs offer flexibility in terms of the typ 
e of deal they can pursue, such as a merger or acquisit
.ion, which may be more difficult in a traditional IPO
Valuation: SPACs can offer a more certain valuation f 
or the company going public, which can be appealing
.to investors
:
Comparing SPACs and Traditional IPOs
:Disadvantages of SPACs
Risk: The companies that are acquired by 
SPACs are often less established than thos
e that go through the traditional IPO proce
.ss, which may be riskier for investors
Fees: There may be higher fees associated
with investing in SPACs, which can impa
.ct the returns for investors
:
Comparing SPACs and Traditional IPOs
:Advantages of traditional IPOs 
Underwriting: Traditional IPOs are typically unde 
rwritten by investment banks, which can provide e
.xpertise and support throughout the process
Diversification: Traditional IPOs offer more diver 
sification options for investors, as they can invest
.in a variety of companies
Regulatory requirements: Traditional IPOs are sub 
ject to more regulatory requirements, which can p
.rovide more transparency to investors
:
Comparing SPACs and Traditional IPOs
:Disadvantages of traditional IPOs
Time-
consuming: Traditional IPOs can be a lengthy
and time-
consuming process, which can delay the com
.pany's access to capital
Valuation: Traditional IPOs may be subject to 
more uncertainty in terms of company valuati
.on, which can be less appealing to investors
:
Conclusion
In summary, both SPACs and traditional IP
Os offer unique advantages and disadvantag
es in terms of their structure, regulation, un
derwriting, and other factors. The choice be
tween these two methods depends on a vari
ety of factors, such as the company's goals,
.market conditions, and investor preferences