Buyout Vehicles Going Public Score Hit With InvestorsBy YVONNE BALL April 23, 2007; Page C5
They have no operating assets, and there is no guarantee they will find any, but blank-check companies are growing in popularity after a quarterly record 17 of them went public in U.S. markets in the first three months of this year.
Also known as special-purpose acquisition companies, or SPACs, blank-check companies are essentially empty shells that promise to buy a business with the proceeds from their initial public offerings of shares.
Their popularity has been rising since 2004 when only 13 went public, raising $483.6 million, according to data tracker Dealogic.
That grew to 30 in 2005 and 40 last year, raising $2.1 billion and $3.4 billion, respectively.
Already this year, 20 blank-check companies have gone public, including three last week. Together, they have raised $2.1 billion. The average size of the deals in the past four months is about $107 million, with the largest belonging to Stamford, Conn.-based Information Services Group Inc.'s $259 million IPO. As the name suggests, the company intends to scour the information-services industry, including business, media, marketing and consumer information, for potential acquisitions.
Despite first-day returns averaging 0.1%, which may not be that surprising given that these companies have no real businesses, their popularity appears likely to continue. Since November, 12 more have filed paperwork to go public with plans to raise $1.5 billion, according to Dealogic.
As their numbers continue to grow, so too is their credibility, according to Michael Kollender, a managing director at financial-services firm Stifel Nicolaus. He has no connection to any SPACs.
"The market is certainly much more mature than it has been," he said. "There are much larger firms investing in and managing the SPAC IPOs."
Citigroup, Merrill Lynch and Deutsche Bank are prominent Wall Street firms that have underwritten some of the deals.
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