One of the world’s leading alternative asset management firms, Apollo Global Management, has announced its plan to raise $500 Million.
The $500 Million fund that Apollo will raise will be used to invest in Special Purpose Acquisition Companies (SPACs), as per industry sources. (Courtesy: Reuters)
What Are SPACs?
If you’re not aware about SPACs so far, it is one of the most trending routes to take a private company public.
Catching steam in 2020, the SPAC route navigates and skips through complex regulatory filings and paperworks while taking a company public.
A special purpose acquisition company is a shell company which raises money from investors with the aim to merge with a private corporation and take it public.
Past Performance Of Apollo SPACs
The $500 Million fund that Apollo Global Management is planning will invest in SPACs and also provide liquidity to SPAC managers via acquiring founder shares.
But the main question is.. is the SPAC route good in the long term? How have SPACs performed historically? Let’s analyze using Apollo’s example.
According to SPAC research data, only a small portion of total IPOs via SPAC are trading at a premium to the debut price. Just 14 out of 144 SPAC mergers are trading above $10 (IPO Price).
Apollo Global Management is not new to the world of SPACs. They have launched Spartan Energy Acquisition Corp, which merged with Fisker Inc last year. Apollo was also involved in taking Sunlight Financial Holdings public via Spartan Acquisition Corp II vehicle.
Fisker Inc shares hit a high of $28 in early February but since then the stock has gone for a nose dive, ending below $14 recently. Sunlight Financials stock is currently trading at almost a 50% discount compared to debut price of $10.
With the rising popularity of SPACs, it can still not be made certain that they are always profitable in the long run. However, Apollo Global Management’s initiative is a bold one and what happens next is to be seen.