Which Companies Go Public via SPACs? The Role of Private Equity and Venture Capital Financing

This study investigates the characteristics and stock market performance of companies merging with special-purpose acquisition companies (SPACs) compared to companies that conducted a traditional IPO in 2020 and 2021. Moreover, it examines the impact of private equity and venture capital funding on the mode of going public and the post-listing performance. Using a sample of 795 companies, the results show no systematic differences between SPAC merger and traditional IPO companies before going public. Both groups were, on average, of low quality in terms of profitability or capital structure. Nevertheless, SPAC targets performed constantly and significantly worse in terms of post-listing stock returns. Over a one-year period after becoming publicly listed, they underperformed the broad market and traditional IPO companies by 45 and 25 percentage points on average. Investor funding per se had no impact on the mode of going public, but companies with more prestigious investors and private equity investors preferred traditional IPOs over SPACs.