February 24, 2021 – Despite the short month, SPAC issuance and deal activity continue at a record pace.
With two business days left in February, special purpose acquisition company IPO issuance has reached a new record, with $27.2 billion raised over 79 blank check IPOs month-to-date. The previous record, established in January, was $25.6 billion raised over 91 new blank check issues. The average amount raised in SPAC IPOs has grown from $281 million last month to $344 million.
Year-to-date, there has been $52.8 billion raised across 170 SPAC initial public offerings. If the current pace continues, we could see over $300 billion of capital raised in over 1,000 SPAC IPOs in 2021. This forecast level of issuance would trounce last year’s record sum of $83 billion. The equity window remains wide-open for SPAC sponsors to raise new vehicles, as every deal remains significantly oversubscribed and trades to a premium on the first day. February’s SPAC IPOs are trading +6.7% over IPO price on average.
Since last month’s SPAC monitor, the blank check universe has expanded from 337 to 429 (excluding today’s IPOs), and the total market capitalization of the asset class has increased from $152 billion to $190 billion.
Business combinations are being struck at a brisk pace, with nearly 3 per day on average this month. Concurrent PIPE financings are more important than ever for deal validation and are included in nearly every SPAC merger. New investors are participating in the space, including Cathie Wood’s ARK Invest on the $425 million PIPE for the HighCape Capital Acquisition / Quantum-Si deal and Seth Klarman’s Baupost Group on the $835 million PIPE for the Reinvent Technology Partners / Joby Aviation merger.
SPAC NAV premiums remain disconcerting, reaching a record high of 26.9% this month prior to declining to the current 20.9%, after the SPAC market went through a correction.
Accelerate believes that high average SPAC premiums have brought elevated risks to the current market environment, which is why we implemented additional risk mitigation measures in the Accelerate Arbitrage Fund ETF (TSX: ARB). These measures include a more aggressive pruning of the SPAC common share and warrant portfolio and a reduction in leverage. We believe risk management should be investors’ number one priority in the current market environment, which remains volatile.
The Accelerate AlphaRank SPAC Monitor details various metrics on the current opportunity set while offering details on every individual SPAC currently outstanding. The Accelerate AlphaRank SPAC Effective Yield tracks the average arbitrage yield offered in the market. The Accelerate AlphaRank SPAC Index tracks the price return of the SPAC universe.
* AlphaRank is exclusively produced by Accelerate Financial Technologies Inc. (“Accelerate”). The Accelerate Arbitrage Fund may hold a number of securities discussed in this research. Visit AccelerateShares.com for more information.