Tuesday 15 June 2021 7:40 pm

SPAC boom sees US IPOs hit annual record with half a year to go

The recent boom in SPAC listings has seen US IPOs already break their annual record, with the year not yet at its half way point.

Data from financial services firm Dealogic found that so far this year, stock market floats in the US have raised $171bn, up from the previous record of $168bn, which was set last year.

SPACs, or blank check companies, are listed shell companies that raise cash with the sole purpose of merging with a private company within two years of the listing.

Thus far this year, there have been 339 such firms formed this year, raising $105bn, nearly two-thirds of the total proceeds from listings.

Despite a recent cooling of investor enthusiasm toward the newly popular listing method, the boom is expected to continue in the second half of the year, with a number of start-ups, such as ride hailing app Didi, due to float the traditional way.

Market sentiment has been helped by the Federal Reserve, which appears committed to keeping interest rates at record lows, and increased stimulus spending.

With Didi’s float predicted to raise around $10bn on its own, IPOs could total as much as $300bn over the full year, nearly double the previous record.

The average one-day gain for U.S. IPOs so far this year is 40.5 per cent, compared with 28.2 per cent during the same period in 2020 and 21.7 per cent in 2019, Reuters reported, quoting Dealogic’s figures.

The average one-week return for 2021 is 35.7 per cent, higher than 32.2 per cent in 2020 and 25.5 per cent in 2019.