On April 8th, the New England Venture Capital Association gathered a panel of top legal minds and risk management experts for the inaugural session in our Member Edu Series — SPACs: New Vehicles, New Risks. We were thrilled to welcome to the panel, Al Browne, Partner at Cooley, Pam Mason, Partner at Mason AHT, and Eklavya Saraf, Nasdaq’s Global Head of SPAC listings and Managing Director of new listings.
Although the SPAC market is nothing new, 2020 became the “year of the SPAC” with a record number of listings, making up about half of all IPO’s in 2020. Their popularity has skyrocketed due to an escalated and more lenient process under which a company can go public. In addition, a capital rich environment has spurred interest, attracting some of the world’s largest private equity funds as well as other investors, including celebrities.
As the market continues to develop into 2021, we wanted to have a conversation with our panelists on the nuances of this popular alternative to traditional public listings, helping attendees understand the overall risk profile and how a portfolio company can be positioned to net the best results.
NEVCA’s President, Jody Rose and Director of Development and Strategic Initiatives, Ari Glantz, kicked the session off with an introduction to the event and the lineup of panelists. Pam then gave a high level overview of the recent SPAC surge in 2020, and opened up the conversation on how the IPO-alternative gives companies the ability to get to market quicker.
“There are new structures being developed in the SPAC market. 2021 will certainly be the year of the De-SPAC. In 2021, we are going to see many of those SPACs prove the success of the SPAC vehicle. And with more optionality in the market, it certainly could mean companies will start going public earlier in their life cycles,” Eklavya weighed in.
However, most skyrocketing trends experience a turning point, and the panelists explored those emerging headwinds as they relate to the SPAC market, covering topics such as:
- Increasing SEC Interest
- Plaintiff bar focus and increased litigation
- Increasing amount of SPACs running out of quality targets
- Financial performance guidance and PSLRA protections for SPACs
With Al adding, “The SEC has recently said there are significant undiscovered issues with SPACs, and I think it is important as we talk to our companies about it, that it’s stressed that you really are embarking on an IPO — you need to have the processes in place, you need to be prepared to disclose, and in many cases with companies with real revenue, you need some predictability to that revenue stream.”
The conversation next turned to the SPAC market within the context of venture specific topics. Panelists explored the advantages and the detriments, providing key insights, experience, and industry knowledge. They explored potential conflicts and strategies, and did a deep dive into how this niche market affects and interacts with the VC world.
Saraf explained, “We’re seeing legacy venture capital investors launch new SPAC vehicles, when in the past they wouldn’t have really been involved in the SPAC game. We’re certainly seeing private equity firms launching SPACs, which is very interesting because you have these growth venture funds that are almost more of a venture fund than a private equity investor, and I think that theme will continue to emerge. You’re seeing the venture capital and the private equity community looking very similar in a lot of ways for certain funds, and they’re both getting involved with SPACs.”
After each panelist provided their unique insights, the afternoon moved into a Q&A section. Questions from participants popped up covering everything from assessing potential target quality to SPAC pricing data and major players like SoFi and Robinhood.
The webinar was followed by a Rally Video networking session — a great opportunity for attendees to engage with other attendees, as well as speakers, on the subject matter.
Thank you to all who joined us and to our sponsors and panelists at Cooley, Nasdaq and Mason AHT.
Want to stay up to date on upcoming Member Edu Series Sessions and other NEVCA events? Check out our Events Calendar!