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SPAC is now a $700 billion market: Morning Brief



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Wednesday, March 3, 2021

Goldman Sachs used the prosperity of SPAC as its background.

In the second half of last year, we wrote an article by David Kostin’s equity strategy team on Goldman Sachs, declaring 2020 as the year of SPAC.

In the months since this report, this trend has only accelerated.

The Kostin team released the latest information on the space and pace of launch of these vehicles on Monday.

Maybe an understatement.

As of February 26, approximately 175 SPAC sponsors made their debut on the public market, raising a total of 56 billion U.S. dollars. In 2020 (a record year for the SPAC IPO), about 223 SPAC sponsors entered the market.

According to data from SPAC Insider, as of Tuesday, there are approximately 204 SPAC IPOs listed. According to Street Insider data, no less than 1

2 SPACs were announced on Tuesday alone. At this rate, the record year of SPAC by 2020 may be eclipsed by the end of the weekend. SPAC Insider data shows that from 2009 to 2019, SPAC had a total of 226 IPOs.

As a quick reminder, SPAC is an acronym for Special Purpose Acquisition Company and is often referred to as a “blank check” company. These are publicly listed entities, and their shares do not represent claims on the business of subordinate companies, but reflect ownership in the capital pool, which will then be used to acquire existing businesses.

As early as January, we regarded SPAC as another micro-bubble. In the past few years, similar bubbles have appeared in the market many times. However, Goldman Sachs data shows that the capital behind these tools represents stronger market dynamics than speculative funds invested in cryptocurrency projects or hot pot stocks in the 2017s.

Goldman Sachs wrote: “SPAC may generate more than $700 billion in acquisitions in the next two years.” We estimate that SPAC capital of US$103 billion is actively looking for acquisition targets. The total ratio of target enterprise value to related SPAC capital in the merger announcement is 7 times this year, which is an increase from 6 times in 2020 and 3 times in 2010.If the year-to-date ratio remains the same, SPAC will acquire companies worth more than $700 billion [enterprise value]. “

Given the interest of customers and the broader market, we hope Kostin and the team will continue to maintain this theme. The chart below provides us with the easiest way to think about the hidden value of the SPAC universe-just multiply the total SPAC capital seeking to acquire by 7.

At present, more than 100 billion US dollars of SPAC capital are seeking to acquire, and according to the current transaction multiples, this means that these transactions can release about 700 billion US dollars of potential value.  (Source: Goldman Sachs)

At present, more than 100 billion US dollars of SPAC capital are seeking to acquire, and according to the current transaction multiples, this means that these transactions can release about 700 billion US dollars of potential value. (Source: Goldman Sachs)

Although the multiples of SPAC transactions continue to rise, Goldman Sachs has also found that the value of companies listed through this channel is increasing, and the speed at which sponsors use their funds is also increasing.

Goldman Sachs data shows that so far this year, the average value of a company listed through SPAC is 2.9 billion US dollars, higher than last year’s 1.7 billion US dollars and nearly a decade of 800 million US dollars. Sponsors also found their targets 175 days after the initial public offering (IPO), which is less than half of the time sponsors spend on search in 2020, compared to 487 days on average in the 2010s.

after Myers Abroad, Reporter and host Yahoo Finance Live.Follow him @MylesUdland

Want to know today

economic

  • 7:00 AM EST: MBA mortgage application, Week ending February 26 (-11.4% in the previous week)

  • 8:15 AM EST: ADP employment changes, February (expected to be 200,000, January is 174,000)

  • 9:45 AM EST: Markit U.S. Comprehensive PMI, Late February (previously printed as 58.8)

  • 9:45 AM EST: Markit U.S. Service Industry PMI, February finals (58.9 expected, 58.9 previously printed)

  • 10:00 AM Eastern Time: ISM Service Index, February (expected to be 58.7, January is 58.7)

  • 2:00pm Eastern Time: The Federal Reserve releases the Beige Book

income

Before listing

After listing

  • 4:00 PM Eastern Time: Splunk (Sound pressure level) Adjusted earnings per share are expected to be 3 cents, and revenues are $678.1 million.

  • 4:00 PM Eastern Time: Okta (OKTA) Expected adjusted loss per share of 1 cent and revenue of $220.5 million

  • 4:00 PM Eastern Time: snowflake(snow) The adjusted loss per share is expected to be 17 cents and revenue is $178.5 million.

  • 4:05 PM Eastern Time: Vroom Inc (VRM) The adjusted loss per share is expected to be 37 cents, and revenue is 401.85 million U.S. dollars.

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