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I'm missing what is good for a company when they go through a SPAC the 20% fee is close to what the average POP for an IPO which historically has been 13-15% an

by jrott 6y ago

I'm missing what is good for a company when they go through a SPAC the 20% fee is close to what the average POP for an IPO which historically has been 13-15% and last year was 22%[1]and in exchange for dealing with a bunch of investment bankers you get to give up a board seat at best or being the CEO of your company to the promoter. Is it really just to dodge regulations? [1]https://www.cnbc.com/2019/05/09/the-ipo-market-started-strong-and-could-soon-take-off.html https://www.cnbc.com/2019/05/09/the-ipo-market-started-stron...

S3an12 6y ago
A SPAC is much less of a headache for a company that wants to go public. Instead of having to talk to a whole bunch of investors to set a price for your stock you only have to negotiate with the SPAC. SPAC are usually quicker then an IPO allowing you to raise money faster.
Lazare 6y ago
The general tradeoff here is: An IPO is a difficult, involved process. You jump through a lot of hoops, you have to write a bunch of documents, you do a road show, and at the end of it you don't even know how much money you're going to raise. As with WeWork, it's very possible the IPO may be derailed before it gets to the end, or the price will be cut in order to get it done (meaning you don't raise what you expected). Plus, the price may drop after the IPO (meaning many of your new investors are mad and you get bad press), or it pops a bunch after the IPO (meaning many of your old investors are mad and you get bad press). It's not a great process! On the other hand, you'll probably get something a bit like a market price - as you note, IPO prices tend to be within 15-20% of the eventual market price. A SPAC is different. You talk to one guy (or team, at any rate), you negotiate a deal for a fixed price, you sign, it's done. Sure, it's very, very expensive, because you're paying to get rid of that risk, but maybe you really hate risk? (Note: the 20% fee is only one part of the cost of the SPAC. And there's still a chance of a pop, as with Nikola who surged enormously. Much of the money they raised was at $10 per share, but they closed at $33.97 on the first day, and $53.95 a month later. Good deal for some...but not for Nikola or their original investors.)

by jrott 6y ago

S3an12 6y ago

A SPAC is much less of a headache for a company that wants to go public. Instead of having to talk to a whole bunch of investors to set a price for your stock you only have to negotiate with the SPAC. SPAC are usually quicker then an IPO allowing you to raise money faster.

Lazare 6y ago

The general tradeoff here is: An IPO is a difficult, involved process. You jump through a lot of hoops, you have to write a bunch of documents, you do a road show, and at the end of it you don't even know how much money you're going to raise. As with WeWork, it's very possible the IPO may be derailed before it gets to the end, or the price will be cut in order to get it done (meaning you don't raise what you expected). Plus, the price may drop after the IPO (meaning many of your new investors are mad and you get bad press), or it pops a bunch after the IPO (meaning many of your old investors are mad and you get bad press). It's not a great process! On the other hand, you'll probably get something a bit like a market price - as you note, IPO prices tend to be within 15-20% of the eventual market price. A SPAC is different. You talk to one guy (or team, at any rate), you negotiate a deal for a fixed price, you sign, it's done. Sure, it's very, very expensive, because you're paying to get rid of that risk, but maybe you really hate risk? (Note: the 20% fee is only one part of the cost of the SPAC. And there's still a chance of a pop, as with Nikola who surged enormously. Much of the money they raised was at $10 per share, but they closed at $33.97 on the first day, and $53.95 a month later. Good deal for some...but not for Nikola or their original investors.)