The resurgence of special purpose acquisition companies (SPACs) as an alternative to traditional IPOs was one of the major talking points of 2020. SPACs enjoyed somewhat of a renaissance in 2020, particularly in the United States1 and have become attractive propositions for investors, venture capital firms and private equity funds looking to efficiently deploy capital quickly and enhance their portfolios in an era of low interest rates and market volatility2.
The SPAC boom showed little sign of slowing as it moved through the first quarter of 20213 as investors continued to search for the most effective jurisdictions in which to incorporate SPAC vehicles. Offshore jurisdictions, including the Cayman Islands (Cayman) and the British Virgin Islands (BVI), have proven to be particularly well-suited to SPACs given their business-friendly, flexible and internationally recognised legal regimes, and SPACs continue to be incorporated in these jurisdictions at a growing pace across a number of sectors4.
1248 SPACs were listed in the United States in 2020, raising approximately US$83 billion with the average capital raised at IPO being US$336 million (SPAC Research).
2SPAC investment vehicles offer several advantages over more traditional acquisition and investment holding structures (e.g. ensuring significant cash reserves and investor protections etc.), and are expected to become a major part of how investors and PE / VC firms do business over the next several years.
3135 US-incorporated SPACs were listed in the first three months of 2021 and 94 Cayman and BVI-incorporated SPACs were listed. More SPAC listings have taken place in Q1 2021 (a total of 310) than took place in the whole of 2020 (SPAC Research and S&P Global Market Intelligence).
4Recent notable Cayman-incorporated SPACs include Ares Acquisition Corporation (NYSE: AAC), which raised circa US$900 million in January 2021, and Austerlitz Acquisition Corporation II (NYSE: ASZ), which raised US$1,200 million in February 2021. Recent notable BVI-incorporated SPACs include Kismet Acquisition One Corp (NasdaqCM: KSMT) which raised US$250 million in July 2020, and AdvancedAdvT Limited (LSE: ADVT), which raised US$181 million in March 2021 and on which Conyers advised.