SPACs are just getting started

The “blank check” acquisition funds known as special purpose acquisition companies, or SPACs, have raised more than $30 billion so far this year, versus $13 billion in all of last year. Can they keep it up? dealbook spoke with some of the most plugged-in SPAC bankers and lawyers on Wall Street, and they cited three factors driving the boom:

1️⃣ Valuations are soaring for popular SPAC targets

“The pipeline is heavily weighted to technology and growth companies,” said Niron Stabinsky, who leads SPAC deals at credit suisse. He said that he speaks to big venture firms “weekly” about their portfolios. Many have taken notice of recent success stories, like Virgin Galactic's merger with a SPACfiled to go public.

2️⃣ SPACs aren't just an alternative to traditional I.P.O.s

3️⃣ The flood of money to SPACs means better terms for targets

“Everything is negotiable,” the venture capitalist Bill Gurley wrote in a detailed case for SPACs on his blog this weekend. As competition between SPACs intensifies, “sponsors are continuing to negotiate deals that look better for the companies they buy,” he said in the essay, which quickly became the talk of Wall Street and silicon valley.

The standard-bearer of a new approach for SPACs is the $4 billion fund sponsored by Bill Ackman's Pershing Square, the largest to date. The fund's warrants are structured in a way that encourages investors to stay invested longer in the merged company, and Pershing will take its “promote” only if the company it buys meets certain performance goals. Sponsors without Mr. Ackman's reputation may find those terms hard to imitate, but some are adopting similar elements all the same, experts say.

What's next? Mr. Gurley predicted that SPAC fund-raising this year could be four times higher than the previous record, set in 2019, implying another $20 billion or so to come. The buoyant markets are attracting figures not known for deal making to the space, like the former Congressman Paul Ryan and the baseball executive Billy Beane, which sows doubts among some about the durability of the boom. Just SPAC mergers involving electric car companies and auto technology firms — “deals on wheels,” as one analyst put it to The Times's Neal E. Boudette and Kate Kelly — are already worth more than $10 billion.