SPACs - the horse before the cart

New York - In a recent wrinkle in the IPO market, firms are going public before having a company to take public. The financial vehicle that lets this happen is called a SPAC – Special Purpose Acquisition Company. According to an article in Monday’s Wall Street Journal (Acquisition Vehicles Gather Stream, 6/18/07), there have been 30 SPACs listed this year for a total of $3.5 billion.

If this rate keeps up, the SPAC market will double from last year’s total, when there were 40 SPACs listed for a total of $3.4 billion. Additionally, the average deal size has increased from an average of $84.5 million to $115.9 million. The largest SPAC so far was the December 2006 listing of Freedom Acquisition Holdings Inc., which raised $528 million.

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