Report: 30+ Startups Got PPP Loans, Then Merged With SPACs

Dozens of companies sought and received federal assistance through the Payroll Protection Program (PPP) that Congress created to help small businesses survive COVID-19 shutdowns, and then went on to reap large payouts by going public, The Wall Street Journal reported.

More than 30 tech companies that were funded with venture capital and valued at more than $150 million went public through mergers with special-purpose acquisition companies, or SPACs, less than a year after receiving federal PPP loans, the Journal reported. PPP loans can turn into grants if recipient companies maintain their payrolls.

Another 15 companies valued at $200 million or more went public through conventional IPOs a year or so after seeking and receiving PPP money, the Journal reported. The findings were based on data from PitchBook Data Inc.

One potential reason for the pattern was that tech company leaders feared financial catastrophe due to the onset of COVID-19, only to realize over time that their firms could capitalize on the changes forced by the pandemic. Executives and investors disagree over whether companies that received help designed to protect small Main Street businesses should seek to have the loans converted into grants or pay them back.

Albert Wenger, managing partner at venture capital firm Union Square Ventures, told the Journal: “I think, generally speaking, any company that produces a great outcome within, say, a year or two of having received a PPP loan should consider repaying it, even if they technically qualify or have already received forgiveness.”

A third of the 15 highest-value venture-funded businesses that went public have repaid their loans or pledged to do so, the report noted. For example, Scott Mercer, CEO and founder of electric vehicle charging company Volta Industries Inc., said that his company, which just raised $600 million through a SPAC deal, would have qualified for forgiveness, but is paying the money back. “It was an invaluable tool, it helped, and we are happy to pay it back, because it got us to a place of unexpected success. Back in April 2020, I had no idea what a SPAC was,” Mercer said. Volta has about 140 employees and kept all of them through the pandemic, the Journal reported.

Shift Technologies Inc., a seller of used cars, repaid a $6.85 million PPP loan the day it received more than $300 million through a SPAC deal. Co-Chief Executive George Arison was quoted as having said: “We have the liquidity, we have the capital we need to grow. Why keep something that you don’t need?”

Other companies, such as autonomous trucking firm TuSimple Holdings Inc., have sought to turn loans into grants despite apparent success. The company has asked for forgiveness of a $4.1 million loan, although it has raised more than $1 billion through an IPO that valued it at $8.5 billion, the Journal reported.