Why Choose SPACs as a Way to Grow?
Growing a company usually means the need to attract fresh capital. A Special Purpose Acquisition Company (SPAC) isn’t a new way to reach public markets, but it is seeing a resurgence in its popularity.
Although interest rates are near all-time lows, most private companies aren’t going to be able to access the debt markets on favorable terms. Even larger debt offerings from the blue chips have hit a wall, and while this may be resolved over the coming months, companies that want to find new sources of investment will need to think creatively.
In addition to a choppy debt market, the outlook for IPOs over the coming year isn’t great. Failed IPOs make everyone in the market nervous about backing a new company, given the amount of work involved in taking a company public via a sale of equity in the traditional sense. Not only is a failed IPO expensive, but it is also a PR nightmare.
Special Purpose Acquisition Companies (SPACs) address the needs of a growing business and have become extremely popular over the last two years. Unlike debt or IPOs, a SPAC can help a business attract badly needed capital, with few risks attached to the company that is on the receiving end of the capital.