Egregious Founder Shares. Free Money for Hedge Funds. A Cluster***k of Competing Interests. Welcome to the Great 2020 SPAC Boom.

It’s a brilliant, blue-sky afternoon in mid-August, and Bill Ackman is enjoying being, well, Bill Ackman.

Maybe it’s the sun. Or maybe it’s the aftermath of his latest tour de force — the IPO of a $4 billion special-purpose acquisition company, or SPAC, the largest of its kind during a year when such blank-check deals are exploding.

5 things you need to know about…SPACS

SPACs (special purpose acquisition or “blank cheque” companies) have recently regained prominence in the US, with H1 2020 seeing record-breaking levels of activity, both in terms of value (Bill Ackman’s $4bn Pershing Square Tontine is the largest SPAC IPO to date, eclipsing previous records) and volume (SPACs accounted for around 30% of all US IPOs in H1 2020). One of the reasons for the revived interest is that experienced founder teams can benefit from a dislocated market to find good opportunities that yield attractive returns.

It Pays To Be A (SPAC) Winner

If you want to place a bet on who comes out on top in the next Disney (DIS) cartoon, bet on plucky little upstarts. The smaller, weaker outcasts defy the odds and win the day pretty much every day. That’s how it works in the movies. It’s not how it works in the world generally or in special purpose acquisition companies (SPACs). As I wrote in SPAC Size Matters, the best opportunities are in the biggest SPACs.

The Rise Of SPACs

One of the very interesting topics Directors are hearing about is a liquidity structure called a SPAC (Special Purpose Acquisition Company). As Directors get invited to join Boards of SPACs or do their diligence if a SPAC is right for their private company, I share some information I think will be helpful.