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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

Dan Primack, author of Pro Rata
Oct 12, 2020 - Economy & Business

Inside the deal to take the Boston Red Sox public

Illustration: Eniola Odetunde/Axios

Major League Baseball clubs try not to tip their financials, thus giving them better leverage when negotiating new players contracts or new stadium deals. But that might be about to change.

Driving the news: Fenway Sports Group, whose assets include The Boston Red Sox and Liverpool F.C., is in advanced talks to sell a minority stake to Redball Acquisition, a blank check company formed earlier this year by Moneyball maven Billy Beane and private equity investor Gerry Cardinale.

Republican-led Pennsylvania court deems mail-in voting law unconstitutional

Workers count ballots for the 2020 Presidential election at the Philadelphia Convention Center in Philadelphia, Pennsylvania, U.S., on Nov. 3, 2020. Photo: Hannah Yoon/Bloomberg via Getty Images

A Republican-led Pennsylvania court on Friday ruled that the state's mail-in voting law is unconstitutional.

Driving the news: Three Republican judges sided with Republican challengers and ruled that no-excuse mail-in voting is prohibited under the state's constitution. Two Democrats on the panel dissented.

50 mins ago - World

China's ambassador warns Taiwan could spark "military conflict" with U.S.

Photo: Liu Jie/Xinhua via Getty Images

China's ambassador to the U.S. warned in a rare interview with NPR that if Taiwanese authorities "keep going down the road for independence," it would "most likely" lead to a "military conflict" between the U.S. and China.

Why it matters: Chinese officials rarely speak in such blunt terms, but veteran diplomat Qin Gang was unequivocal: "The Taiwan issue is the biggest tinderbox between China and the United States."