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SPACs as an asset class



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Working Paper

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Special Purpose Acquisition Companies, or SPACs, grew into one of the largest segments of the U.S. IPO market prior to the financial crisis, raising more than $20 billion in gross proceeds from 2003 to 2008. SPACs bear a strong resemblance to private equity funds, yet are largely free of the selection and survivorship biases that are often present in private equity datasets. I find that a portfolio of SPACs resembling public LBOs has a market beta near unity despite an average leverage multiple of nearly two, yielding new evidence regarding the systematic risk of leveraged buyouts. I also find that SPACs’ highly predictable lifecycle yields highly predictable returns, with a monthly four-factor portfolio alpha of approximately 2% following the announcement of an acquisition and -2% after an acquisition has been completed. Finally, I provide evidence of a persistent discount in SPAC prices prior to the completion of an acquisition, which I attribute to fragmentation within SPACs’ unique shareholder base


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