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

Miriam Kramer, author of Space
Sep 23, 2020 - Science

Planetary science in the private space age

Illustration: Aïda Amer/Axios

The private spaceflight industry isn't just interested in being the manufacturing and infrastructure workhorse in space — some want in on exploration.

Why it matters: Studying planets from close range has long been the realm of governments able to fund and fly missions to distant locations like the Moon, Mars and Venus. Now, private companies are shooting for those destinations and they're prioritizing science at the same time.

Peter Thiel joins the SPAC boom

Peter Thiel. Photo: Michael Cohen/Getty Images for the New York Times

Peter Thiel is involved in a new SPAC that on Wednesday filed for a $575 million IPO, becoming the latest Silicon Valley tech investor to ride Wall Street's hottest wave.

Why it matters: Thiel, who co-founded PayPal, is one of the few top Silicon Valley investors who have close ties to the Trump administration. He also sits on the board of Facebook.

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Illustration: Sarah Grillo/Axios

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  2. U.S.: Total confirmed cases as of 10 a.m. ET: 7,079,909 — Total deaths: 204,503 — Total recoveries: 2,750,459 — Total tests: 100,492,536Map.
  3. States: New York daily cases top 1,000 for first time since June — U.S. reports over 55,000 new coronavirus cases.
  4. Health: The long-term pain of the mental health pandemicFewer than 10% of Americans have coronavirus antibodies.
  5. Business: Millions start new businesses in time of coronavirus.
  6. Education: Summer college enrollment offers a glimpse of COVID-19's effect.