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Illustration: Aïda Amer/Axios

An avalanche of special purpose acquisition companies — better known as SPACs — raised capital this year to help startups bypass the lengthy and difficult IPO process.

Why it matters: Having more public companies is widely viewed as healthy for the markets and for the American economy, even if the SPAC path elicited skepticism and accusations of froth.

  • Public companies provide greater corporate transparency than do private companies. They also offer more retail investor opportunity, whereas private company investments are often limited to the wealthy.
  • Jay Clayton, the outgoing SEC chair, said in his 2017 confirmation hearings: “I believe that a reduction in the number of public companies, which is a function of fewer companies becoming public, is a problem for our capital markets.”

The big picture: The number of domestic operating companies listed on major U.S. exchanges has declined significantly over the past decade.

  • A major driver was the massive increase in available private-market capital, which manifested itself both as take-private buyouts and as growth equity that enabled startups to stay private longer. Plus a slew of public company mergers.
  • Between 2010 and 2020, the number of IPOs per year with a market capitalization over $50 million peaked at 275 in 2014 and hit a low of 105 in 2016. For context, there were a combined 856 IPOs in 1999 and 2000, during the dotcom boom.

By the numbers: Meanwhile, SPACs cropped up at an unprecedented rate this year, with 95 of them announcing deals to take private companies public.

  • 248 SPACs listed in 2020, raising over $83 billion, per SPAC Research. And there are plenty more in the pipeline.
  • That’s up from 59 SPACs that listed in 2019, raising $13.6 billion.

Between the lines: Much of the SPAC frenzy can be attributed to their super power of being able to take companies public now—taking advantage of favorable stock market conditions.

  • The sea of SPACs accelerated the timeline for companies that were already planning to go public in a year or two, and even convinced some that weren't thinking about it at all.

Yes, but: If the stock market turns bearish, even SPACs might not be able to revive interest in going public.

  • “Do you know where the Dow is gonna be in two years? I don’t,” says Niccolo de Masi, ex-CEO of gaming company Glu Mobile and a co-sponsor for two SPACs. “Valuations are good now, I can get you public now,” he says is the pitch to companies from SPACs.

Go deeper

Dan Primack, author of Pro Rata
Jan 14, 2021 - Economy & Business

Venture capital's record-smashing year

Illustration: Rebecca Zisser/Axios

Just weeks into the pandemic, we reported that venture capitalists were still doing deals, even though their offices were closed and their flights were canceled. But we didn't quite foresee the WFH gusto.

Driving the news: U.S.-based venture capital hit an all-time record in 2020.

Justice Department drops insider trading inquiry against Sen. Richard Burr

Sen. Richard Burr (R-N.C.) walking through the Senate Subway in the U.S. Capitol in December 2020. Photo: Stefani Reynolds/Getty Images

The Department of Justice told Sen. Richard Burr (R-N.C.) on Tuesday that it will not move forward with insider trading charges against him.

Why it matters: The decision, first reported by the New York Times, effectively ends the DOJ's investigation into the senator's stock sell-off that occurred after multiple lawmakers were briefed about the coronavirus' potential economic toll. Burr subsequently stepped down as chair of the Senate Intelligence Committee.

Netflix tops 200 million global subscribers

Illustration: Rebecca Zisser/Axios

Netflix said that it added another 8.5 million global subscribers last quarter, bringing its total number of paid subscribers globally to more than 200 million.

The big picture: Positive fourth-quarter results show Netflix's resiliency, despite increased competition and pandemic-related production headwinds.

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