Special Privilege and Concessional (SPAC)

GameStop, bitcoin, cannabis and SPACs — what do they all have in common? They are the hottest themes in play in the US stock market and runaway favourites of the millions of young, you only live once (YOLO) investors and ardent followers of WallStreetBets.

SPACs (special purpose acquisition companies) are not new creations, having been around the block a few times in the US — though never at such a frenzied pace as now. Last year, some US$83 billion was raised through 248 SPAC listings — compared with a combined US$45 billion raised in the preceding seven years. The pace has picked up even more in 2021, with 167 SPAC IPOs raising US$52.6 billion (RM212.3 billion) in funds in the first seven weeks alone, and rising daily, according to US-based SPAC Research.

This phenomenon is yet another manifestation of cheap money (historic low interest rates) and excessive liquidity — and perhaps the perception that listed companies are already fully valued and that SPACs will acquire undervalued unlisted companies. There are currently 339 SPACs sitting on more than US$105.2 billion in trust money actively looking for acquisition targets.