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A story on SPACs


  • Milan Lakicevic
  • Milos Vulanovic


Purpose - This paper aims to study characteristics of specified purpose acquisition companies (SPACs) and examine the performance of their securities over time. Design/methodology/approach - Previous findings in literature on SPACs' performance around the announcement of merger date are scarce, not uniform, and mostly address the performance of SPACs' common shares. The authors believe that more insights on merger announcements can be obtained if the perf]ormance of all three types of securities that SPACs issue during the IPO, namely units, common stocks, and warrants are analyzed simultaneously. In order to examine the behavior of these securities we form three samples with daily returns for three distinguished SPAC securities. Results are obtained for abnormal returns based on the market model from Brown and Warner. Findings - It is found that SPACs represent a fairly unique way to raise capital. The incentives of their founders, underwriters, and investors are interdependent and successful business combinations generally result in significant returns to founders. The analysis shows that SPACs have a complex corporate structure in which the incentives of the founders, underwriters, and investors are interdependent and where successful mergers result in significant returns to the founders. It also shows that different SPAC securities do not exhibit similar reactions in response to announcements regarding their corporate status. While holders of all three securities realize positive abnormal returns on the merger announcement day, the strongest reaction is observed among the investors holding warrants, while common stock holders react very mildly. Originality/value - SPACs are recent phenomena in capital markets and very few papers in finance literature describe them. None of the existing papers evaluated performance of all three types of SPAC securities: units, common shares and warrants before this paper.

Suggested Citation

  • Milan Lakicevic & Milos Vulanovic, 2013. "A story on SPACs," Managerial Finance, Emerald Group Publishing, vol. 39(4), pages 384-403, March.
  • Handle: RePEc:eme:mfipps:v:39:y:2013:i:4:p:384-403

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    References listed on IDEAS

    1. Cowing, Cedric B., 1957. "Market Speculation in the Muckraker Era: The Popular Reaction," Business History Review, Cambridge University Press, vol. 31(04), pages 403-413, December.
    2. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    3. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    4. Isabelle Huault & V. Perret & S. Charreire-Petit, 2007. "Management," Post-Print halshs-00337676, HAL.
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    Cited by:

    1. Shachmurove, Yochanan & Vulanovic, Milos, 2015. "Specified purpose acquisition companies in shipping," Global Finance Journal, Elsevier, vol. 26(C), pages 64-79.
    2. Lakicevic, Milan & Shachmurove, Yochanan & Vulanovic, Milos, 2014. "Institutional changes of Specified Purpose Acquisition Companies (SPACs)," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 149-169.
    3. Shachmurove, Yochanan & Vulanovic, Milos, 2013. "SPACs in Shipping," EconStor Preprints 88633, ZBW - German National Library of Economics.
    4. Shachmurove, Yochanan & Vulanovic, Milos, 2017. "U.S. SPACs with a focus on China," Journal of Multinational Financial Management, Elsevier, vol. 39(C), pages 1-18.
    5. Milos Vulanovic, 2017. "SPACs: post-merger survival," Managerial Finance, Emerald Group Publishing, vol. 43(6), pages 679-699, June.
    6. Shachmurove, Yochanan & Vulanovic, Milos, 2014. "SPACs with focus on China," EconStor Preprints 92407, ZBW - German National Library of Economics.
    7. Dimitrova, Lora, 2017. "Perverse incentives of special purpose acquisition companies, the “poor man's private equity funds”," Journal of Accounting and Economics, Elsevier, vol. 63(1), pages 99-120.
    8. 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.
    9. Mirjana Cizmovic & Milan Lakicevic & Milos Vulanovic, 2013. "Unit Ipo'S: A Case Of Specified Purpose Acquisition Companies (Spacs)," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 9(1), pages 45-52.
    10. Shachmurove, Yochanan & Vulanovic, Milos, 2018. "SPAC IPOs," EconStor Preprints 177392, ZBW - German National Library of Economics.

    More about this item


    Specified purpose acquisition companies; Investments; Securities markets; Blank cheques; UNIT IPOs;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill


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