IPOs and SPACs: Recent Developments

Abstract

After two decades of low initial public offering (IPO) activity and a number of regulatory changes, the number of IPOs of both operating companies and special purpose acquisition companies (SPACs) boomed in the United States in 2021 before collapsing in 2022. In recent years, surging valuations have resulted in many private companies achieving “unicorn” status, a valuation of $1 billion or more, partly fueled by investments from mutual funds. Many of the unicorns that have gone public have done so with dual-class share structures. We compare three alternative mechanisms for going public, including traditional IPOs, mergers with SPACs, and direct listings. The most common exit for successful venture capital–backed companies, however, continues to be by merging with a larger company. Expected final online publication date for the Annual Review of Financial Economics, Volume 15 is November 2023. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.