Illustration: Eniola Odetunde/Axios

Hedge fund manager Bill Ackman on Wednesday raised $4 billion via an IPO for a special purpose acquisition company (SPAC), the largest such offering in history.

Why it matters: SPACs, publicly traded shell companies designed to acquire other companies, are flooding Wall Street — creating new paths to the public markets for everything from DraftKings to Virgin Galactic to health insurance software giant MultiPlan.

Nearly 50 SPACs have already gone public in 2020, raising more than $20 billion. For context, SPACs raised $13.3 billion in all of 2019 and less than $4 billion in 2015.

  • A SPAC led by former Citigroup executive Michael Klein last month completed the largest-ever SPAC deal, agreeing to acquire MultiPlan at an initial enterprise value of $11 billion.
  • Just one week later, Churchill Capital Corp. IV filed for an IPO.

“They are now considered as viable as any other path of going public, and they’re all performing well,” Niccolo de Masi, ex-CEO of gaming company Glu Mobile and a co-sponsor for two SPACs, told Axios. “SPACs are as institutionalized."

Flashback: Back in the 1980s, so-called blank check companies earned a reputation for fraud.

  • The Penny Stock Reform Act of 1990 and SEC Rule 419 introduced reforms, and SPACs emerged in 1992 as a more modern version with stronger investor protections and regulatory approval.

Some in Silicon Valley see SPACs as preferable to a traditional IPO.

  • Compared to the standard IPO process, it’s much faster with fewer disclosure requirements.
  • They appeal to Silicon Valley investors' fundamental tendencies: Putting up a small amount of capital, owning an outsized piece of the company and placing multiple bets, preferably guided by an underlying thesis or method.
  • “The SPAC structure helped us split the difference of doing a private round and going public,” George Arison, co-founder of online car marketplace Shift, told Axios.

Yes, but: SPACs aren’t without their risks. For example, shareholders can block a deal.

The bottom line: Prepare for even more SPACs.

Go deeper

Jul 22, 2020 - Podcasts

Bill Ackman on the age of SPACs

Hedge fund titan Bill Ackman on Wednesday raised $4 billion in an IPO on the New York Stock Exchange. But it wasn’t for a company, or even for the firm that controls his hedge funds. It was for something called a SPAC, and it was the largest SPAC IPO of all time.

Axios Re:Cap digs into Wall Street's latest craze with Ackman, who was ahead of his time in 2012 when he used a SPAC to bring Burger King public.

Updated 2 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 12:30 a.m. ET: 18,288,573 — Total deaths: 693,805 — Total recoveries — 10,916,907Map.
  2. U.S.: Total confirmed cases as of 12:30 a.m. ET: 4,713,562 — Total deaths: 155,469 — Total recoveries: 1,513,446 — Total tests: 57,543,852Map.
  3. Education — Fauci: Schools can reopen with safeguards, but those in virus hot spots should remain closed
  4. Politics: White House will require staff to undergo randomized coronavirus testing — Pelosi says Birx "enabled" Trump on misinformation.
  5. Sports: 13 members of St. Louis Cardinals test positive, prompting MLB to cancel Tigers series — Former FDA chief says MLB outbreaks should be warning sign for schools.
  6. 1 🎥 thing: "Tenet" may be the first major film to get a global pandemic release.
Updated 3 hours ago - Science

Hurricane Isaias lashes the Carolinas

People walk through floodwaters on Ocean Blvd. in Myrtle Beach, South Carolina, on Monday. Photo: Sean Rayford/Getty Images

Hurricane Isaias made landfall as a Category 1 storm near Ocean Isle Beach in southern North Carolina at 11:10 p.m. ET Monday, packing maximum sustained winds of 85 mph, per the National Hurricane Center (NHC).

What's happening: Hurricane conditions were spreading onto the coast of eastern South Carolina and southeastern N.C., the NHC said in an 11 p.m. update. Ocean Isle Beach Mayor Debbie Smith told WECT News the eye of the storm triggered "a series of fires at homes" and "a lot of flooding." Fire authorities said they were responding to "multiple structure fires in the area."