Originally posted as a Twitter thread on February 14, 2021

Why are there so many SPACs?

Answer 1: Great economics for sponsor (average of 20% of money raised upon deSPAC / merging with a target, Eg $400M SPAC = $80M). It’s like a separate carried interest pool for each company and liquid since already public!

Answer 2: Great economics for investors assuming 0% interest rates (get 100% of your money back if you don’t like the deal! Get warrants just in case you do!). There is no reason NOT to invest in every SPAC at IPO if your alternative is a Bank of America checking account.

Answer 3: TINA (There Is No Alternative), especially given investor inability to access private companies.

However, it’s clear there are way more SPACs than targets (b/c answer #1 in particular). In which case the beneficiary will be…investment bankers who raise the SPACs 🙂