SPACs may be most attractive to ordinary investors. Trendy, innovative companies are staying private longer than they used to because private capital is very available. This allows them to dodge the scrutiny of public markets. At the same time, securities laws deny ordinary investors access to private markets. This forces them to watch from the sidelines as businesses they love, like Airbnb, Instacart, and Robinhood, grow from a startup into a multi-million dollar company. SPACs give the ordinary investor a backdoor to an all-access pass for investing in private businesses before they go public.
Unlike internet stocks in the 1990s, cryptocurrencies, and pot stocks more recently, SPACs have been around for decades. In 2007, the number of SPAC offerings grew to 66 from just one in 2003, according to J.P. Morgan Asset Management. Eventually, the 2008 financial crisis crushed demand. Just this year, nearly 90 SPACs have already gone public through August, and more are expected. Thanks to the abundance of big private companies, there’s plenty of potential companies ripe for the picking by these SPACs.
