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SPAC IPO waves

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  • Blomkvist, Magnus
  • Vulanovic, Milos

Abstract

We examine the wave pattern of U.S. SPAC IPOs using a hand-collected data set of the entire SPAC population since their emergence in 2003. We find that both the SPAC volume and SPAC share of total IPOs are negatively related to market-wide uncertainty (VIX) and time-varying risk aversion (variance risk premium). We attribute our findings to risk-averse investors’ reluctancy to invest in opaque securities. In response, the SPAC sponsor can credibly signal the issue’s quality by increasing their “skin in the game” through the purchase of additional warrants.

Suggested Citation

  • Blomkvist, Magnus & Vulanovic, Milos, 2020. "SPAC IPO waves," Economics Letters, Elsevier, vol. 197(C).
    • Handle: RePEc:eee:ecolet:v:197:y:2020:i:c:s0165176520304055
    DOI: 10.1016/j.econlet.2020.109645
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    References listed on IDEAS

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    1. Tim Bollerslev & George Tauchen & Hao Zhou, 2009. "Expected Stock Returns and Variance Risk Premia," Review of Financial Studies, Society for Financial Studies, vol. 22(11), pages 4463-4492, November.
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    4. Kolb, Johannes & Tykvová, Tereza, 2016. "Going public via special purpose acquisition companies: Frogs do not turn into princes," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 80-96.
    5. Pastor, Lubos & Stambaugh, Robert F., 2003. "Liquidity Risk and Expected Stock Returns," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 642-685, June.
    6. Cumming, Douglas & Haß, Lars Helge & Schweizer, Denis, 2014. "The fast track IPO – Success factors for taking firms public with SPACs," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 198-213.
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    More about this item

    Keywords

    IPO; SPACs; Time-varying risk aversion; Uncertainty; Variance risk premium; VIX;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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