Mega IPOs open windows for SPACs

SPACs are back — and the mega-IPO frenzy is to thank. As blockbuster listings from the likes of SpaceX absorb the bulk of investor appetite and capital on US markets, shell companies are re-emerging as the practical alternative for firms that can't compete for attention at the top of the queue, Reuters reports.

By the numbers: SPAC issuances have been on the up since last year, when they started to recover from a post-2021 dip. So far, USD 36.9 bn worth of SPAC mergers have been announced through 44 agreements, up from USD 15 bn through 33 agreements at the same point the year before, according to Dealogic data.

BACKGROUND- SPACs helped push global IPOs to a record high in 2021, before a wave of underperformers struggled to deliver returns or find viable targets. The current revival is more selective — with sectors drawing interest this time including energy, crypto, defense, and critical minerals.

Nearly 360 SPACs are sitting on c. USD 56.8 bn in dry powder ready to deploy, per SPAC Research. Two big pending transactions illustrate the shift: Taiwan-based battery manufacturer ProLogium Technology is listing on the Nasdaq through a USD 3.8 bn SPAC merger, while the US’s power and lithium resource producer Controlled Thermal Resources agreed on a USD 4.7 bn merger.

SPACs can provide an alternative route, or “a quick side entrance” as Cerity Partners’ Michael Ashley Schulman said, for funds to take advantage of a buoyant market, as mega listings take up a sizable share of investor interest, appetite, and capital.

For the targets, as well as offering an easier access route to the already crowded IPO scene on US capital markets, acquisitions and mergers through shell companies offer more flexibility on terms and a guaranteed capital raise at close.

MARKETS THIS MORNING-

Asian markets are in the green, tracking a broader market rally in the wake of the US-Iran peace agreements’s signing. South Korea’s Kospi jumped 2.8% to break another record, with shares of Samsung Electronics and SK Hynix reaching all-time highs, and Japan’s Nikkei rising 0.6%. China, Hong Kong and Taiwan markets are closed for a holiday.

THE CLOSING BELL-

The ADX rose 1.2% yesterday on turnover of AED 2.5 bn. The index is up 1.2% YTD.

In the green: Invest Bank (+14.8%), Ins. House (+10.1%), and Sharjah Cement and Industrial Development Co. (+9.9%).

In the red: E7 Group Warrants (-5.0%), National Bank of Umm Al Qaiwain (-2.7%), and Al Buhaira National Ins. Company (-2.4%).

Over on the DFM, the index rose 2.5% on turnover of AED 1.7 bn. Meanwhile, Nasdaq Dubai was up 2.7%.