Why SPAC Investors Should Listen to the Market
Speaker
Abstract
| Special purpose acquisition companies (SPACs) have raised around $22bn from investors since 2003, and comprised 20% of total funds raised in US IPOs in 2007. SPACs are interesting structures – allowing investors a risk-free option to invest in a future acquisition. However, we show that more than one-half of approved deals immediately destroy value. Investors, who can observe the market’s view of the proposed deal, as well as that of the founders, should listen to the market, since the extreme incentives faced by the SPAC founders create corresponding conflicts of interest. We propose a simple, observable rule – based on market prices – which investors should heed. |
| Tim Jenkinson is Professor of Finance at the Saïd Business School, and is Director of the Oxford Financial Research Centre and the Oxford Private Equity Institute. He is a director of various companies including economic consulting firm Oxford Economic Research Associates (Oxera), the leading German utility switching company Verivox Group, and the UK-listed investment fund PSource Structured Debt (LSE: PSD). He has consulted for a large number of companies, regulators, government agencies and industry associations. He is a Professorial Fellow of Keble College, Oxford. Tim joined the Saïd Business School in 2000. He was previously in the economics department at Oxford University, which he joined in 1987, and has also spent periods as a Visiting Professor at Dartmouth College. He initially studied economics as an undergraduate at Cambridge University, before going as a Thouron Fellow to the University of Pennsylvania, where he obtained a Masters in Economics. He then returned to the UK and obtained a DPhil in Economics from Oxford. |
| The Erasmus Finance Seminar is jointly sponsored by ERIM and the Tinbergen Institute. |
| Contact information: |
| Viorel Roscovan |
