Investments

SPACs Now Comprise 20 Pct Of IPO Market, Apollo's Harris Says

Alternative investment firm Apollo Global Management Co-Founder Josh Harris said he thinks the trend of special purpose acquisition companies (SPACs) is not a flash in the pan, CNBC reported.

SPACs are blank-check development-stage shell companies that only exist to help other companies go public, at which time a reverse merger happens with a private firm.

Speaking at the Delivering Alpha conference presented by CNBC and Institutional Investor, Harris posited that the SPAC is a necessary tool for companies looking to go public. Apollo, he said, has raised its own SPACs and exited its positions in companies through them, CNBC reported.

Harris talked about the spate of recent SPACs, which saw more money raised than regular initial public offerings (IPOs) in July and August, raising over $30 billion so far this year, CNBC reported. Harris said SPACs have gone from 3 percent to 20 percent of the market during the recent rush in cases.

According to him, the reason for the trend is it's a way to go public quicker than a normal IPO.

“There’s a real need for quick, confidential capital and price certainty and for sponsorship in the markets," he said, according to CNBC. "And most of the SPACs that have been done have been more emerging growth SPACs, less cash flow more growth."

He added that Apollo's interest is in the opportunity to make companies more viable by partnering with them, CNBC reported.

The SPAC has attracted a number of luminary investors in recent months, PYMNTS reported, including Bill Ackman, ex-U.S. House Speaker Paul Ryan and former President Donald Trump Advisor Gary Cohn. And, private companies have merged with SPACs, including sports betting titan DraftKings, and Virgin Galactic, the space flight startup helmed by billionaire Richard Branson.

DraftKings CEO Jason Robins said last month that he thinks the SPAC market is getting a bit unwieldy and hopes it will settle down. He said that while SPACs are good for some companies, they aren't always a good fit for everyone.

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