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Retail Investors and the Going Public Decision: SPACs vs. IPOs

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  • Debarshi K. Nandy
  • Yaxuan Wen

Abstract

We study retail investment interest in SPACs. This is the first paper to document individual investor trading activity following a firm’s IPO or a de-SPAC merger. SPACs provide the opportunity for retail investors to purchase shares of newly public companies at the same price as institutional investors, which is unattainable in a traditional IPO. SPAC shares have an implicit lower bound on its value, given that they can be redeemed prior to the de-SPAC event. Our results show that retail investor interest in SPACs is weak before target announcement but rises quickly afterward and is sustained beyond the de-SPAC merger’s completion. We find that retail investor interest is not impacted by the going-public method (de-SPAC vs. IPO), even though de-SPAC firms tend to be younger and have lower funding liquidity before going public. Our analysis contributes to the going-public literature as well as the literature on retail investors.

Suggested Citation

  • Debarshi K. Nandy & Yaxuan Wen, 2025. "Retail Investors and the Going Public Decision: SPACs vs. IPOs," Review of Corporate Finance, now publishers, vol. 5(3–4), pages 503-547, July.
    • Handle: RePEc:now:jnlrcf:114.00000080
    DOI: 10.1561/114.00000080
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