SPAC: a window on the future

Abstract

The purpose of the following paper is to analyse the phenomenon of SPACs. SPACs are an acronym for special-purpose acquisition companies.

They find fertile ground in an increasingly dynamic and globalised market, where the economic role of start-ups is becoming more and more central precisely because of this need to adapt to the market in a rapid manner.

The economic and financial crisis of 2008 revealed a series of problems concerning the strong dependence of companies on the banking system, painting a strongly bank-centric market in Europe and worldwide. After the crisis, raising capital has become much more complex, and in a social and economic context characterised by undercapitalised companies, a high presence of non-performing loans and increasingly stringent regulations, it was necessary to find a system that would help companies that have significant added value but are unable to access capital for various reasons.

SPACs fall between two major extremes, the equity private placement and the capital market. These companies combine the advantages of an open capital market with the typical characteristics of private equity, management characterised by high professional standards, full involvement in the initiative and exit strategies typical of the private equity world.

In the light of these premises, the aim of this paper is clear: in the first chapter I will provide an overview of the history of SPACs, the origin of the project, and how it has developed over time; I will also provide a detailed definition as well as explain how a SPAC operates. I will conclude the first chapter by analysing the global trends of SPACs divided by geographical areas. The second chapter aims to outline the regulatory framework around SPACs, starting from blank check companies and penny stocks, with a consequent regulatory framework in the US market and comparisons with the European and Italian context in order to assess how the legal context is crucial for an innovation such as this to take hold in a concrete way.

Continuing with the third chapter I will explore the Italian context, going first of all to retrace the past trends of SPACs, already mentioned in the first chapter, continuing by highlighting what are the strengths and weaknesses of SPACs in the Italian market and concluding with an analysis of how the Italian context could change to adapt to the arrival of this financial innovation. In the fourth chapter, I will compare SPACs with IPOs, highlighting differences and similarities in order to provide an overview of the advantages and disadvantages of both listing methods.

Finally, the paper concludes with a case study. The case study will focus on an Italian startup that has used SPACs to list itself.

The case study will be analysed critically and analytically, including an analysis of the advantages and disadvantages of this transaction and for which companies this kind of strategy can bring the most benefits.