The mixed performance of SPACs : how the pie is split between the different stakeholders

Abstract

Special Purpose Acquisition Companies have gained immense popularity in recent years as a means for companies to go public without the traditional initial public offering process. However, the mixed performance of SPACs has resulted in differing opinions among investors and stakeholders. The aim of this paper is to shed more light on the question of how the « pie » is split between the different stakeholders as the benefits from SPAC transactions are not equally distributed among the involved parties. The study examines in details the performance return of SPACs securities for the founders and sponsors of SPACs, the public shareholders, and the third-party private investors (PIPE). Two different approaches are used for the long-term performance measurement of SPACs. The first method relies on the buy-and-hold abnormal return technique with an event-time analysis of the different returns. The second method consists of the regression of a monthly calendar-time portfolio with a multi-factor model.