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Illustration: Eniola Odetunde/Axios

Last month I wrote that SPACs are the new IPOs. But I may have understated it, because SPACs are also becoming the new private equity.

By the numbers: Short for "special purpose acquisition company," SPACs have raised $24 billion so far in 2020, with a loaded pipeline of upcoming offerings. U.S. buyout firms raised nearly $102 billion through the end of June — a much larger amount, but not so much larger that the two can't play on the same field.

What's a SPAC? A shell company that raises money from the public markets for the purpose of buying a private company, thus converting it into a public company. SPACs also are known as blank-check companies, while the acquisitions are also known as reverse mergers.

Mr. Dictionary: Yes, there's a definitional problem with claiming publicly traded entities are the new private equity. Humor me on that.

Between the lines: Private equity and strategic acquirers have long battled over which offers the greatest advantages to target companies when pricing is effectively equal. SPACs are now a sufficiently capitalized alternative to both, representing a combo platter.

  • SPACs usually let existing management remain in charge. Private equity often does that too, but has much greater ability to swiftly reverse course.
  • Strategics give acquired companies a public currency with which to make hires and acquisitions. So do SPACs, without having to ask for permission.
  • Private equity may take a portfolio company public, but it's more likely to sell it to a strategic or other financial sponsor. SPACs give management more say in their company's future.
  • Both private equity and SPACs can add debt to a company's balance sheet, but only one is likely to follow that up with dividend recaps.

Private equity does still let a company avoid the hassle and costs of public disclosure, which can lead to higher executive pay, but that’s typically a better sell for troubled companies than growing ones that plan to soon to public anyway.

The bottom line: Private equity is sitting on tons of dry powder and isn't going away. But it's no longer the only game in town.

Go deeper

Nov 5, 2020 - Technology

Facebook groups are turning into election disinformation vectors

Screenshot: German Marshall Fund

Public and private Facebook groups are becoming vectors of disinformation about ballot counting, as the results of the presidential race remain unclear and states finish tallying votes under individual state laws and timelines.

Driving the news: Facebook took down a public group called "Stop the Steal" that quickly amassed hundreds of thousands of members Thursday. Yet conspiracy theories and false claims continue to circulate widely in other groups, including private ones predating the election that have been repurposed as disinformation repositories.

Updated 43 mins ago - Technology

Mayors see cryptocurrency as a way to address income inequality

Illustration: Sarah Grillo/Axios

At the U.S. Conference of Mayors' meeting in D.C. this week, there's buzz around the idea of giving cryptocurrency accounts to low-income people.

Why it matters: Cities have been experimenting with newfangled ways to address income inequality — like guaranteed income programs — and the latest wave of trials could involve paying benefits or dividends in bitcoin, stablecoin or other digital currencies.

Updated 45 mins ago - Politics & Policy

Omicron dashboard

Illustration: Aïda Amer/Axios

  1. Health: FDA OKs antiviral drug remdesivir for non-hospitalized COVID patients — Walensky: CDC language "pivoting" on "fully vaccinated" — Fauci: "Confident" Omicron cases will peak in February
  2. Vaccines: Team USA 100% vaccinated against COVID ahead of Beijing Olympics — Kids' COVID vaccination rates are particularly low in rural America — Annual COVID vaccine preferable to boosters, says Pfizer CEO.
  3. Politics: Arizona governor sues Biden administration over COVID funds tied to mandates — Biden concedes U.S. should have done more testing — Arizona says it "will not be intimidated" on anti-mask school policies.
  4. World: Greece imposes vaccine mandate for people 60 and older — Austria approves COVID vaccine mandate for adults — Beijing officials urge COVID-19 "emergency mode" before Winter Olympics.
  5. Variant tracker