SPACs Bolster the U.S.'s Global Lead in IPOs
May 21 2021 - 4:59AM
Dow Jones News
By Ben Dummett
The boom in blank-check companies earlier this year has lured
companies to list in New York and has cut into Europe's share of
the global market for initial public offerings.
Sigma Sports United, a Berlin-based sports e-commerce and
technology platform, is among the latest looking at this route
through a special-purpose acquisition company, or SPAC. It is in
talks to merge with Yucaipa Acquisition Corp. to go public on the
New York Stock Exchange. The deal would include the acquisition of
the U.K. online bike retailer Wiggle Chain Reaction Cycles and
could value the combined company at up to $4 billion, according to
people familiar with the matter.
Eleven European companies operating in sectors ranging from
packaging to healthcare have announced deals this year to go public
through a U.S.-listed SPAC, according to Refinitiv. European
exchanges have only attracted four such tie-ups: two in Germany,
one in the U.K. and one in Italy.
That divide highlights Europe's competitive disadvantage when it
comes to SPACs. The region has a smaller pool of these vehicles
looking for targets to take public on a European exchange.
SPACs are publicly listed shell companies that raise money to
make an acquisition. They offer targets a quicker way to go public
than a traditional IPO. Their popularity in the U.S. has outpaced
Europe because of more accommodating listing rules in some markets
and investors' greater familiarity with the vehicles.
Besides having far more SPACs, the U.S. has more-developed
technology and healthcare sectors. These have emerged as leading
sources of new listings, said Paul Go, IPO head at Ernst &
Young.
In 2015, IPOs on Europe's exchanges raised $66 billion to lead
the three biggest markets with a 34% share, ahead of the U.S. at
19% and Asia, excluding Japan, at 32%, according to Dealogic. The
continent's share has since dropped to about 15% so far this year,
while the U.S. leads with about 61%. Asia, excluding Japan,
accounts for around 19%.
The postponement of at least three U.S. offerings last week
could signal the start of a slowdown in the U.S. IPO market, and
the frenzy around SPACs has cooled recently. Even so, Europe is far
behind this year.
So far in 2021, U.S. exchanges have attracted at least 324 SPAC
listings, of which 309 are still searching for deals. That compares
with 10 in Europe, none of which have done a deal yet, according to
Dealogic.
Another issue facing Europe is that U.S.-listed SPACs offer
potential takeover targets a springboard for geographic expansion,
SPAC sponsors said.
"We are looking for a European or Israeli company that is either
already present in the U.S. or has a clear rationale for why it
would want to expand in the U.S.," said Tommy Stadlen, chairman of
NYSE-listed Tailwind International Acquisition Corp.
In other cases, a deeper and more knowledgeable pool of analysts
and investors following a particular industry gives U.S. SPACs an
advantage attracting European targets. Such a pool was part of the
reasoning behind Luxembourg-based Ardagh Group SA's pact in
February to merge its metal packaging business with Gores Holdings
V Inc., a Nasdaq-listed SPAC. The newly created company aims to
list on the New York Stock Exchange.
The "peer set and the analysts who cover [the sector] are
U.S.-based, and it's probably fair to say the bulk of the
shareholders would be in the U.S.," said John Sheehan, Ardagh's
investor-relations director.
European stock markets are fighting to keep companies at home.
Starting in February, Nasdaq Inc.'s exchanges in Sweden, Denmark
and Finland introduced rules allowing SPAC listings.
Meanwhile, the Euronext Amsterdam exchange used a March
promotional video for a new SPAC listing to tout the goal of its
parent company, Euronext NV, to be Europe's SPAC center. That
ambition received support last week with the listing of Hedosophia
European Growth. The blank-check company is headed by Ian Osborne,
a partner in the U.S. with the SPAC evangelist Chamath
Palihapitiya.
The U.K., Europe's biggest IPO market, is seeking to loosen its
listing rules to help the London Stock Exchange compete against its
New York rivals for SPACs. The country's stock-market watchdog is
expected as early as this summer to eliminate a rule that prevents
investors from trading a SPAC's shares between an acquisition's
announcement and approval of the deal's prospectus. That change
would allow investors to no longer risk being tied indefinitely to
a transaction they don't like, allowing them to bet more freely on
SPAC IPOs.
Write to Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
May 21, 2021 05:44 ET (09:44 GMT)
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