There was over $ 125 billion in ad hoc acquisition company, or SPAC, mergers this year, more than quadruple the total of 2019. And that is only expected to accelerate in 2021.

Driving the news: Three new PSPC mergers have been announced in the past 24 hours, totaling more than $ 3.6 billion, all in the vehicle area. In addition, nine new PSPCs have priced the IPOs, raising a total of $ 2 billion.

The big picture: Supply and demand are overflowing – hundreds of unicorns and even more near-unicorns with over 225 PSPCs actively seeking targets.

  • Then add a group of active PIPE investors, although a few have become more selective in recent times, new PSPC trainings every day and a vibrant leveraged loan market.

What we don’t know that is if this is sustainable.

  • Everyone is now throwing themselves in the pool, including the venture capitalists in a show of buyout reciprocity, but that’s not nobody’s core business – except, perhaps, Michael Klein. If there is some sort of SEC regulatory crackdown on President-elect Biden or a few big explosions scaring new investors away from blank check IPOs, then the SPAC market could shrink as fast as it has grown. .
  • Bankers say they’re not worried because there is so much variety in what SPACs ultimately buy. And there is some truth to that, but there has been a very strong focus so far in the EV / AV conceptual space.

Between the lines: It has long been said that private markets follow public markets. In 2020, however, the reverse was true.

  • Public equity investors act as venture capitalists, avoiding current fundamentals for five-year TAM projections.
  • And, with PSPCs, they buy into blank check structures that mimic buyout funds, albeit with a worse LP economy and no portfolio diversity.

The bottom line: It’s the new normal – for now.