Going public via special purpose acquisition companies: Frogs do not turn into princes

Kolb, Johannes; Tykvová, Tereza

doi:10.1016/j.jcorpfin.2016.07.006

Cited by 94 publications

(33 citation statements)

References 40 publications

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“…Dimitrova (2017) found that, on average, SPACs perform extremely poorly, whether measured by long-run stock abnormal returns or operating performance. Kolb and Tykvová (2016) also presented similar observations. The average decrease in share price of the remaining five South African SPACs since listing amounts to 29.92% (as at 06 February 2020).…”

Section: Empirical Review Of Special Purpose Acquisition Company Performancesupporting

confidence: 72%

“…Similarly, the results by Kolb and Tykvová (2016) show that SPAC acquisitions are a viable alternative when the IPO channel is blocked. The analysis of 127 SPAC acquisitions and 1128 IPOs shows that particular small and levered firms with low growth opportunities tend to use this vehicle.…”

Section: Literature Reviewmentioning

confidence: 76%

“…According to Riemer (2007), SPACs are, in essence, publicly traded buyout firms that are incorporated with the sole objective of raising funds for an acquisition through a public offering of their securities. Kolb and Tykvová (2016) described SPACs as cash shells that try to buy private operating firms upon which they confer public-listing status. Murray (2017) maintained that SPACs are shell companies that originally have no operations and which are created to undertake a business combination with an operating business.…”

Section: Defining a Special Acquisition Companymentioning

confidence: 99%

“…Special purpose acquisition companies have been used as a modern financing structure since the 1990s in the United States of America and are gaining popularity in other countries, such as Australia, Austria, Canada, Germany, Malaysia, the Netherlands, New Zealand, South Africa, South Korea and the United Kingdom (Murray 2017;Shachmurove & Vulanovic 2015). However, limited research has been carried out to date on SPACs internationally and especially in South Africa (Dimitrova 2017;Kolb & Tykvová 2016;Riva & Provasi 2019;Shachmurove & Vulanovic 2015). Yochanan and Milos (2018) have summarised the available literature on SPACs and have found the legal and financial literature, explained SPACs' historical development, institutional characteristics and structure well.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The analysis of 127 SPAC acquisitions and 1128 IPOs shows that particular small and levered firms with low growth opportunities tend to use this vehicle. The likelihood of a SPAC acquisition further increases as markets turn more volatile (Kolb & Tykvová 2016). Moreover, SPAC acquisitions seem to offer an advantage to target firms' initial shareholders, as they are able to realise higher cash-out ratios during a SPAC acquisition than in the course of an IPO.…”

Section: Literature Reviewmentioning

confidence: 99%

See 4 more Smart Citations

Special purpose acquisition companies as a vehicle for providing venture capital to small and medium size enterprise

Marx

Mohammadali-Haji

Botha

et al. 2021

Journal of Economic and Financial Sciences

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Orientation: The South African economy is currently at one of its lowest points in several decades, with low economic growth, coronavirus challenges and unemployment being at an all-time high. This is further aggravated by the many challenges the economy faces, such as the lack of public sector programs to stimulate sustainable growth and a private sector mind-set that lacks business confidence and investment.Motivation of study: A SPAC is an innovative financial structure that aims to raise funds in capital markets with the purpose of acquiring an unknown exiting company, using the funds as finance, within a limited time period. Special purpose SPACs focusing on SMEs with additional criteria and incentives might prove to be a valuable vehicle that provides funding to stimulate economic growth, kick start the second economy and erode unemployment in South Africa.Research purpose: The objective of this article was to provide an overview of a special purpose acquisition company (SPAC) as a vehicle to fund future business operations and, further, to explore the opportunities that it may provide to the South African economy to stimulate growth in the second economy and small and medium-sized enterprise (SME) sector.Research approach/ design and method: This article follows a qualitative research design with an exploratory approach.Findings and contribution: Research on SPACs internationally and in South Africa is scarce and this article makes a significant contribution to the existing body of knowledge. The findings indicate that the financial measures show underperformance of SPACs relative to some traditional financial measures.Practical implications: Non-financial considerations are important in considering the value that SPACs can bring to the ailing South African economy. Special purpose acquisition companies also provide opportunities to those informal sectors, which would never be able to get access to funding and formal markets in other ways.

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Section: Empirical Review Of Special Purpose Acquisition Company Performancesupporting

confidence: 72%

Section: Literature Reviewmentioning

confidence: 76%

Section: Defining a Special Acquisition Companymentioning

confidence: 99%