SPACs were regarded as a type of niche investment vehicle in the capital markets for a long time. That began to change in 2017 when the quantity of SPAC IPOs and mergers started to increase. Then, when equity markets began to recover from the COVID-19 pandemic’s initial shock, there was a burst of SPAC activity from the midpoint of 2020 to the first quarter of 2021. SPACs attracted record amounts of funds through their initial public offerings, and important companies from a variety of industries entered the fray as sponsors and investors. The increase in activity was exceptional. SPAC IPO earnings in the first quarter of 2022 were higher than those for the whole of 2020/2021. SPAC IPO proceeds made up 39% of the global IPO market for the entire year of 2022; and #LicorneGulf, an Investment firm & Capital Raising company had mastered the trends for their client with successful stories.
However, will SPACs eventually become obsolete given their complexity and increased regulations? “Firmly No” mentioned Irina Duisimbekova, President & Co-Founder of Licorne Gulf, “SPACs do offer potential benefits to businesses and investors, despite the notion held by some that SPACS have failed as a result of subpar performance and more stringent regulation. Well-known private equity companies will probably continue to sponsor SPACs as they increase their access to equity money from non-traditional sources. SPAC activity is still going on today both internationally and in the US. U.S.-based Intuitive Machines launched a SPAC with a valuation of close to $1 billion in September 2022”
…../”and more to come in 2023 especially when the merger is backed by a post listing capital injection through share subscriptions facilities where at Licorne Gulf, we are fully backed by some of the largest New York Investment fund specialized into it” Mrs Duisimbekova added.
SPACs have also gained popularity in Europe, with the first half of 2022 seeing $1.78 billion funded by European Union SPACs, according to International Law firm specialized.
“With a few acquisitions that closed in 2022, SPACs have also expanded to Israel, Latin America, Hong Kong, and Singapore. SPACs are likely to persist for 2023, albeit at lesser levels, and perhaps even gain appeal once more opportune market conditions prevail. The structures will change as necessary to reflect the changing financial legislation and competitive environment” – Alexandre Katrangi, Licorne Gulf Saudi Arabia.
In times of uncertainty or market instability, SPACS tends to slow down, but those can also be the moments when valuations improve and opportunities present themselves.
“We are confident that exciting SPAC possibilities will exist in 2023 based on experience, recent transaction activity, and knowledge of clients’ ongoing deals. As long as firms have a well-thought-out strategy, the financial means, and occasionally the confidence to execute transformational deals, deals that will influence their businesses and contribute to their longer-term success, we may be in a sweet place for SPAC, according to the current market conditions and this is what we say in the Q1 meetings with our clients” highlights Ms Rim Mathlouthi – Licorne Gulf Board Member. Despite the regulatory and market difficulties SPACs confront, prospective target companies should still consider them as suitable IPO vehicles. For instance, the target’s valuation and ultimate price are negotiated with the SPAC rather than through the market or an IPO book-building process, which is a significant benefit above traditional IPOs. As a result, going public through a SPAC merger is less prone to market volatility than doing so through an IPO. It can also be a quicker way to go public, especially given that the market environment will probably continue to be adverse for initial public offerings (IPOs) in the near future. A SPAC merger also gives access to cash and perhaps management or sector knowledge. Young private companies looking to go public as well as private equity funds looking to exit portfolio companies may find these advantages useful.
“Thus the first half of 2023 could be the ideal time to strike a good deal for Private Companies that are a good fit for going Public via a SPAC merger” – Rim Mathlouthi, Licorne Gulf Board Member.
The SPAC acquisition process still has some benefits over a conventional IPO for businesses considering going public or those that are already publicly traded in another market, and given the level of market competitiveness, targets are in a better negotiating position than before. Overall, SPACs, are intricate investment vehicles that are in many ways created to benefit their sponsors and IPO investors. Targets must develop a solid knowledge base and use the insights in negotiations with SPACs in order to benefit from the advantages of the current seller’s market. Success depends on preparation and a willingness to engage in aggressive negotiation, but definitely, 2023 is a highly promising year!