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What is The Productive Way to Use SPACs for Companies?

The Rapid Decline in SPACs Shows That Changing Market Conditions May Still Be A Huge Risk for Investors

İSTANBUL, Türkiye, Aug. 10, 2023 (GLOBE NEWSWIRE) -- After SPACs (Special Purpose Acquisition Companies) became one of the most popular ways to take companies public in the lockdown, it rapidly raised the capital income a lot and drew attention from both new and well-known public investors. However, this flexible and efficient alternative to a traditional IPO had a sudden decline trend in 2021. According to Nasdaq, in 2021 SPAC listings had an increase of 91% compared to the year before, 2020, and the total raising amount reached 145$ billion with a number of 613. But despite this rewarding surge, the number of SPAC listings declined in 2022, with a number of only 86 SPACs going public. While the high and low trends made private investors question whether it’s a sustainable way to embrace, Usul Ventures Attorney Kaan Özçelik shared some significant facts about the market lifecycle and customer behavior.

Indicating that SPACs were powerful tools to adapt for companies aiming to go public, Özçelik emphasized the importance of having a broader perspective to catch a long-lasting growth trend in the volatile market. He also said that eliminating market risks and seeking out the best way was about understanding company goals, activities, and vision thoroughly. And once a company carried out a clear-cut strategy, using SPAC as a financial instrument could be much more profitable than the traditional IPO alternatives, he underlined.

“The Overload in the Market Could be Responsible for the Downfalls”

Attorney Kaan Özçelik, who manages company mergers and IPO processes in Usul Ventures, shared important insights on SPAC listings and their potential for companies compared to traditional IPOs.

“Special Purpose Acquisition Companies (SPACs) are a type of investment vehicle created solely to acquire an existing company and raise capital through an initial public offering (IPO). SPACs are also known as Blank Check Companies because they typically do not have any specific commercial operations or assets during the IPO process. While the popularity of SPAC IPOs has been increasing since the early 2000s, the years 2020 and 2021 have been recorded as record years for SPAC IPO applications. In contrast with that, the decline in SPAC IPOs raised questions about whether they're still effective methods to invest in. But the decline can be attributed to several factors. First, the increased regulatory scrutiny on SPACs in recent years has led to a more cautious approach from investors and companies. The Securities and Exchange Commission (SEC) and other regulatory bodies have been closely monitoring SPAC activities, and this has raised concerns about potential risks and uncertainties associated with these transactions. Second, market conditions and investor sentiment have also played a role in the decline. In 2021, the market witnessed a surge in SPAC IPOs, which led to a saturation point. As a result, some investors may have become more selective in their choices, and companies may have opted for more traditional IPO routes," he said.

“Company Communication Skills Could Be The Key Factor in SPACs”

Deciding going public through SPACs is an effective method. Attorney Özçelik highlighted that it can be a viable option for certain companies under the right circumstances. "SPACs offer a faster and potentially less complex way to become publicly listed compared to traditional IPOs. Additionally, SPACs provide companies access to a pool of capital from public investors that they can use to fund their growth and expansion plans. It is especially attractive to companies that can effectively communicate their growth potential and business strategy to attract investors during the short IPO period in the US. It's important to note that a company's communication strategy plays a crucial role in a successful SPAC IPO. Companies that can articulate their vision, growth prospects, and market differentiation efficiently are more likely to attract investor interest during the IPO process."

However, Attorney Özçelik also emphasized that going public through SPACs may not be suitable for every company. "The decision should be based on the company's specific needs, long-term objectives, and market conditions. Companies need to carefully assess the advantages and disadvantages of the SPAC route and consider factors such as dilution of ownership, regulatory requirements, and post-merger integration. Overall, SPACs can be a valuable tool for companies seeking to go public, but it is essential to approach the process with a thorough understanding of the associated risks and a well-defined strategy to achieve their goals."

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/80771c0a-ae4c-4b3b-a89a-0c701ac12f5f


Media Contact Information
Onlipr - Kadir OZPINAR - k.ozpinar@onlipr.com
Kaan Ozcelik - Usul Ventures

Attornet Kaan Ozcelik - Usul Ventures