This Week in Startups Emergency Pod! SPAC Overload: Understanding 2021’s unprecedented SPAC market | E1193
Apr 1, 2021
Delve into the explosive growth of SPACs in 2021, revealing their allure and potential pitfalls for investors. Discover the intricacies of PIPEs versus traditional IPOs, and how market conditions influence performance. Hear the dramatic tale of a hydrogen truck startup that dazzled investors but ultimately fizzled out. Explore the current SPAC landscape with big names like 23andMe and WeWork, while emphasizing the importance of due diligence. Finally, consider the risks involved in SPACs and cryptocurrencies, urging a balanced investment approach.
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Shrinking Public Market
- The number of publicly traded companies has decreased significantly since the 1990s.
- This scarcity concentrates capital into fewer companies, potentially leading to overvaluation.
SPAC Explained
- A SPAC, or Special Purpose Acquisition Company, is a "blank check" company.
- It raises capital through an IPO to merge with and take a private company public.
SPAC Process and PIPEs
- A SPAC raises capital through an IPO and has a set time to find a company to acquire.
- A PIPE (private investment in public equity) allows additional investment at a discounted price.