Fintech SPAC Transactions in Europe and the United States
This article first appeared in The International Comparative Legal Guide - Fintech 2021.
Public listings through reverse mergers with special purpose acquisition companies (SPACs) have returned to the capital markets spotlight and are being utilised at record-breaking levels as an expedited alternative to traditional initial public offerings (IPOs).1 Often referred to as “blank check companies”, SPACs are publicly traded shell corporations that raise capital through an IPO of the SPAC (a SPAC IPO) in order to subsequently
acquire and take public a privately-held target company in what is known as either a SPAC merger, a “De-SPAC” transaction or an initial business combination (a SPAC IBC).2 The volume of SPAC IPOs and related SPAC mergers (collectively, SPAC transactions) skyrocketed in 2020 as a result of COVID-19-related financial market uncertainty, as well as sponsor, investor and target company appetite for liquidity and exit opportunities.3 2021 is projected to be another potentially strong year for SPAC transactions with approximately $172 billion in SPAC merger value already recorded in the first quarter of the year.4 Technology is considered to be the dominant sector for SPAC investment,5 and an increasing number of SPACs are being formed worldwide to combine with target companies in the financial technology (Fintech) sector. This chapter provides a brief overview of the rise of Fintech SPAC transactions in the European and United States (U.S.) Fintech ecosystems.