The impact of financial crisis on the performance of special purpose acquisition companies (SPACS)

Abstract

Special Purpose Acquisition Companies (SPACs) are listed companies without operating activities, and their sole purpose is to merge with a privately held entity. The analyses performed aimed to compare SPAC-merged companies against companies that followed traditional IPOs. The results point out that SPAC-merged firms have significantly weaker financial characteristics in relation to traditional IPOs and tend to go public during less favorable market conditions. Regarding the likelihood of a company going public through a SPAC merger, its higher leverage and lower growth opportunities are significant drivers for this choice, with emphasis during recession periods. The results from the performance analysis demonstrate that SPAC-merged companies significantly underperform the market and traditional IPOs both in the short- and long-run, and in different macroeconomic periods. SPAC-merged companies present significantly negative excessive returns in both crisis and non-crises periods, and their performance is explained in part by higher market returns and weaker operating profitability.

Date of Award	17 Oct 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Eva Schliephake (Supervisor)