SPAC Sponsors Have Been Busy Beavers With a Record Number of IPOS & Announced Deals in February, but March has Brought a Slowdown in Filings

Details

Tech SPAC sponsors were busy beavers last week with 28 completed IPOs, which is roughly 2x the last weekly record, 9 acquisitions and 24 IPO filings, which are down from their peak of 38 in the second week of February. Aftermarket performance continued to fall with 79% of the 58 announced acquisitions in 2021 trading below their pre announcement trading price and down a median of 6%. That is a stark contrast to the 39 announced deals in 2020, which are up a median of 31%. Half of the 2021 acquisitions are pre-revenue stories and the other half had a median revenue multiple of 11.7x at the time of their acquisition. There are too many SPAC suitors chasing too few available partners. There are hundreds more healthy, fast growing, solid private tech companies, but as of now they are resisting going the way of the SPAC. So with 300 tech SPACs with roughly $660B of buying power all chasing a finite group of available sellers, we may continue to have overpricing on deals and poor aftermarket performance. If you have 20 SPAC term sheets for your business and five of them are offering you more than what it's worth, it's awfully hard to say no. Will the PIPE and IPO investors continue to vote for overpriced deals?Simple rules of the road for a healthy SPAC market are:

On the pre revenue stories expect a wild ride and long road before tangible financial traction
On the established revenue generating companies:
Acquire solid, fast growing tech companies with compelling unit economics & predictable revenue streams – easier said than done
Regardless of how good the company is, it has to be ready to be public
Have strong PIPE investors lined up ahead of the acquisition announcement, preferably with a FPA
Price it at a value that leaves upside for the aftermarket, like any traditional IPO