Banker: SPAC deals aren't going anywhere

Jim Bunn, head of global equities and investment banking at Raymond James Financial was on CNBC to discuss the outlook for special purpose acquisition companies (SPACs).

A SPAC, also known as a black-check company, goes public via an IPO to raise money with the sole purpose of acquiring another company and does not have any existing business operations.

After attracting record fund flows, SPACs have started to get regulatory scrutiny and some leading investors are also raising concerns about these investment vehicles. Ray Dalio, Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates, said the following regarding the recent boom in SPACs:

But Bunn believes SPACs are here to stay and let’s look at what he said. 

SPACs are here to stay

He further added that the IPOs peaked at about 100 in March and pulled back to 10 in April. 

Unlike traditional IPOs, SPACs do not have to issue new shares when they take a private company public, which protects the earlier investors of the private company from dilution. After a SPAC goes public, it needs to find a company within the next two years, failing which, it has to return the money raised back to the investors.

There are 400 SPACs currently listed on the stock exchanges that are actively for companies to take public and most of them will have to find their targets by the end of 2022, according to Bunn.

Record M&A deals

Bunn also discussed the record number of M&A deals happening globally.

He said that the global M&A market has been up for three quarters in a row. The last two quarters were the most active M&A quarters in three years. Q4 last year was an all-time record quarter in the United States and Q1 2021 was a record M&A quarter in Europe.