Tina Pappas, a managing director at investment bank Morgan Joseph & Co., reviewed the state of the market for special purpose acquisition companies in the Wednesday morning session of Morgan Joseph's Inaugural SPAC conference.
Continue reading below
Among the statistics that she outlined were:
- Thus far in 2008, SPACs have been nearly half of all IPO activity
- The average deal size has doubled from 2006 to 2007
- There have been 50 approved M&A transactions with an aggregate value of $14.6 billion
- China-focused SPACs have been active and have been some of the best-performing SPACs, which is driving activity in that segment
However Pappas commented that recent developments have resulted in a cooling-off period of SPAC IPOs. "We have a supply/demand imbalance," she said, referring to the current glut of SPACs stuck in registration. Pappas attributed the slowdown to a mixture of post-acquisition trading performance and a decline in warrant prices.
Nevertheless, Pappas doesn't expect SPACs to be regulated to the sidelines. "For the SPAC market to rebound, the structure will need to evolve," she commented. Pappas also cited enlarging the investor base and delivering attractive business combinations to shareholders as other key ingredients of the asset class' future growth.
"When the window reopens, the market will be more selective," she said. "We think SPACs are here to stay, and stay tuned." - George White
