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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.

27 mins ago - World

U.N. envoy resumes push for cease fire in Gaza

Tor Wennesland. Photo by KHALIL MAZRAAWI/AFP via Getty Images

Tor Wennesland, U.N. Special Coordinator for the Middle East Peace Process , has been holding extensive talks with both Israel and Hamas over the past 24 hours in an effort to restore peace, a diplomatic source tells Axios.

Driving the news: The source said Wennesland spoke on Sunday to Israel’s National Security Adviser Meir Ben-Shabbat and other senior Israeli security officials as well as Hamas officials and Egyptian intelligence officials.

3 hours ago - Health

CDC director says politics didn't play a role in abrupt mask policy shift

Centers for Disease Control and Prevention Director Rochelle Walensky told Fox News Sunday that political pressure had nothing to do with the agency's sudden announcement that fully vaccinated Americans can go without masks in most indoor settings.

Why it matters: Emerging evidence shows vaccinated people are less likely to transmit the virus, as COVID-19 cases and deaths drop. But the responsibility to uphold the abrupt policy change falls to individuals and businesses.