EXCLUSIVE: Microsoft Cloud Computing System Suffering From Global Shortage Read Now

Canoo's beta vehicles. Photo courtesy of Canoo

As SPACs Search for Merger Candidates, Risks for Investors Grow

By  |  Jan. 29, 2021 9:00 AM PST
Photo: Canoo's beta vehicles. Photo courtesy of Canoo

When Allied Esports went public by merging with a special purpose acquisition company in mid-2019, its financial statements showed its businesses had generated just $20.6 million in revenue in 2018. A company with such low revenue would have been a nonstarter for a traditional initial public offering, bankers say. But for SPAC deal makers, it was nothing out of the ordinary.

The explosion of SPACs has created an opportunity for a much wider range of companies to go public than could tap the IPO market, ranging from startups with little or no revenue to more mature companies whose revenues are not growing. But for investors, the risks are rising as SPACs bring more companies with unproved or slow-growth businesses into the public market.

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