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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.

Woman who allegedly stole laptop from Pelosi's office to sell to Russia is arrested

Photo: FBI

A woman accused of breaching the Capitol and planning to sell to Russia a laptop or hard drive she allegedly stole from Speaker Nancy Pelosi's office was arrested in Pennsylvania's Middle District Monday, the Department of Justice said.

Driving the news: Riley June Williams, 22, is charged with illegally entering the Capitol as well as violent entry and disorderly conduct. She has not been charged over the laptop allegation and the case remains under investigation, per the DOJ.

Biden will reverse Trump's attempt to lift COVID-related travel restrictions

Photo: Tasos Katopodis via Getty

The incoming Biden administration will reverse President Trump's last-minute order to lift COVID-19 related travel restrictions, Jen Psaki, the incoming White House press secretary, tweeted.

Why it matters: President Trump ordered entry bans lifted for travelers from the U.K., Ireland, Brazil and much of Europe to go into effect Jan. 26, but the Biden administration will "strengthen public health measures around international travel in order to further mitigate the spread of COVID-19," Jen Psaki said. Biden will be inaugurated on Wednesday, Jan. 20 and Trump will no longer be president by the time the order is set to go into effect.