Podcast
The IPO SPAC-Tacle
- The podcast will be published approximately once monthly as part of the exchanges feed.
- The number of U.S. publicly traded companies reached one of its lowest levels in two decades in 2019, but constructive market conditions and rising valuation multiples have prompted a shift toward public listings.
- An exceptional surge in SPAC activity is noted, with approximately 60 U.S. SPACs launched in the first three weeks of 2021, contributing to bubble concerns alongside lofty public market valuations.
- Goldman Sachs projects that if macroeconomic recovery and vaccine prospects remain positive, IPO volumes in 2021 and beyond could approach 2020 levels.
- Investor valuations currently anticipate market conditions for 2022 and beyond, based on confidence in vaccination success and fiscal stimulus.
- Risks to the 2021 IPO outlook include deteriorating investor sentiment from a worsening economic outlook, lower company quality, material rises in interest rates, or shaken confidence regarding vaccine efficacy.
- A stock market decline similar to February of the previous year could cause the IPO market to shut down rapidly, while inconsistent returns from suboptimal listings may lead companies to delay public plans until conditions normalize.
- Experts predict the traditional IPO route will remain the primary method for new listings due to control and reliability, though direct listings and SPACs are expected to represent materially larger percentages of the market over time.
- While Jay Ritter anticipates market moderation, he notes that a significant slowdown in SPAC activity is not expected immediately despite concerns over average post-merger returns and inherent dilution.
- Skeptical views suggest SPACs may eventually die out or shrink substantially in their current form due to unsustainable dilution, potentially evolving toward structures with better incentive alignment, though this may not occur immediately.
- Many venture-backed companies continue to view selling to big tech as a more effective strategy for rapid growth than growing organically or going public.
- The views expressed are not necessarily those of Goldman Sachs, and the firm provides no warranty regarding the accuracy or completeness of the statements, nor does it offer financial, economic, legal, accounting, or tax advice.