An introduction to the phases of Special-purpose Acquisition Companies and their returns
(2021) NEKH02 20211Department of Economics
- Abstract
- Using the data of 110 completed special-purpose acquisition companies (SPACs) U.S.-listed between the 1st of January 2019 and the 15th of September 2021, this paper will examine the returns of SPACs based on the three phases of their SPACs life cycle in addition to the returns of their two main events; the merger announcement and the merger completion. Phase one is defined as the time period between the SPAC’s Initial Public Offering (IPO) and the announcement of a business combination proposal. Phase two is defined as the time period between the announcement of a business combination proposal and the actual merger or acquirement of the target firm. The third phase is defined as the period between the actual merger to the acquirement of... (More)
- Using the data of 110 completed special-purpose acquisition companies (SPACs) U.S.-listed between the 1st of January 2019 and the 15th of September 2021, this paper will examine the returns of SPACs based on the three phases of their SPACs life cycle in addition to the returns of their two main events; the merger announcement and the merger completion. Phase one is defined as the time period between the SPAC’s Initial Public Offering (IPO) and the announcement of a business combination proposal. Phase two is defined as the time period between the announcement of a business combination proposal and the actual merger or acquirement of the target firm. The third phase is defined as the period between the actual merger to the acquirement of the target firm and onwards. The data collected will be compared to the S&P500 index to test for excess returns and abnormal returns, thus testing the hypothesis which states that the first phase of SPACs only presents a low-risk opportunity to outperform the returns of the general market due to the abnormal returns affiliated with event one. The results support the hypothesis whereby the excess returns of the SPACs, in their phase one, phase two, and phase three were 17.85%, minus 17.81%, and minus 22.43% with abnormal returns of 22.45%, minus 12.54%, and minus 15.41%. The 11 day period surrounding event one was found to have a cumulative average abnormal return (CAAR(-5,5)) of 10.00% which proved to be statistically significant whilst the 11 day period surrounding event two had a CAAR(-5,5) of 0.93% and was not proved to be statistically significant. In conclusion, there is a low-risk opportunity present to outperform the general market by owning SPACs during their first phase. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9067048
- author
- Stael von Holstein, Nicholas LU
- supervisor
- organization
- course
- NEKH02 20211
- year
- 2021
- type
- M2 - Bachelor Degree
- subject
- keywords
- SPAC, Investment Vehicle, Blank Check Company, IPO, Private Equity
- language
- English
- id
- 9067048
- date added to LUP
- 2022-02-03 08:23:36
- date last changed
- 2022-02-03 08:23:36
@misc{9067048,
abstract = {{Using the data of 110 completed special-purpose acquisition companies (SPACs) U.S.-listed between the 1st of January 2019 and the 15th of September 2021, this paper will examine the returns of SPACs based on the three phases of their SPACs life cycle in addition to the returns of their two main events; the merger announcement and the merger completion. Phase one is defined as the time period between the SPAC’s Initial Public Offering (IPO) and the announcement of a business combination proposal. Phase two is defined as the time period between the announcement of a business combination proposal and the actual merger or acquirement of the target firm. The third phase is defined as the period between the actual merger to the acquirement of the target firm and onwards. The data collected will be compared to the S&P500 index to test for excess returns and abnormal returns, thus testing the hypothesis which states that the first phase of SPACs only presents a low-risk opportunity to outperform the returns of the general market due to the abnormal returns affiliated with event one. The results support the hypothesis whereby the excess returns of the SPACs, in their phase one, phase two, and phase three were 17.85%, minus 17.81%, and minus 22.43% with abnormal returns of 22.45%, minus 12.54%, and minus 15.41%. The 11 day period surrounding event one was found to have a cumulative average abnormal return (CAAR(-5,5)) of 10.00% which proved to be statistically significant whilst the 11 day period surrounding event two had a CAAR(-5,5) of 0.93% and was not proved to be statistically significant. In conclusion, there is a low-risk opportunity present to outperform the general market by owning SPACs during their first phase.}},
author = {{Stael von Holstein, Nicholas}},
language = {{eng}},
note = {{Student Paper}},
title = {{An introduction to the phases of Special-purpose Acquisition Companies and their returns}},
year = {{2021}},
}