Investor beware when it comes to SPACs

SPECIAL Purpose Acquisition Companies (SPACs) have grown in popularity over the past few years with SPAC initial public offering (IPO) capital in the US increasing from US$3 billion five years ago to US$76 billion in 2020.

This was perhaps buoyed by superior performance of recent SPAC mergers such as Virgin Galactic and DraftKings, which resulted in 53 US SPAC IPOs being launched in the first two weeks of 2021.

In South-east Asia, the US$40 billion valuation for the SPAC merger between Altimeter Growth Corp and Grab this year is a prominent example of a well-known company participating in this relatively new form of financing.