Baker McKenzie recently issued its 2020 IPO Report, which discusses the current year’s activity & the trends to watch for in 2021. Peak SPAC or not, it looks like SPAC deals will continue to feature prominently in the mix – at least until things return to a more normal environment:
In looking at what 2021 holds for the IPO markets, the economic outlook will largely hinge on the distribution of a vaccine to COVID-19, heralding the official beginning of a return to “normalcy” and the full return of consumer confidence. As businesses successfully re-engineer their financial statements to an economic environment of recovery, we can expect to see capital raises for businesses to start expanding and investing in their growth and development, leading to a ripple effect of economic activity.
Until then, we will likely continue to see a proliferation of Special Purpose Acquisition Companies (SPACs) as well as businesses continuing to access the capital markets in conventional ways with going public, given that there remains a huge amount of dry powder in the private equity markets.
SPACs have historically been met with skepticism by the market and investors alike, but improved regulatory requirements and a number of recent high profile and successful acquisitions have helped to build the interest and momentum behind one of this year’s biggest trends. While these regulatory requirements vary across geographies, the more risk-averse framework in the US is one of the primary reasons that almost all SPAC activity takes place in New York.
The report notes that SPAC deals drove a huge increase in US domestic IPO activity during 2020, and points out that continuing tensions between the U.S. and China and the recent enactment of the Holding Foreign Companies Accountable Act has led to a number of jurisdictions, Hong Kong and London in particular, planning and introducing regulatory changes on stock exchanges in an effort to lure China-based listings away from the U.S. markets.
-John Jenkins, TheCorporateCounsel.net January 11, 2021
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