Seven new SPACs filed S-1’s last week, bringing the total on file to 18. Those SPACs are looking to raise over $9bn (before over-allotment), and it’s the largest SPAC IPO pipeline we’ve ever seen. Here’s a summary of how much capital has been on deck to IPO since we started tracking it in Q3 of last year.
Bill Ackman’s upcoming $4bn SPAC Pershing Square Tontine Holdings (PSTH) represents nearly half the current total. But even without PSTH we’d have a record amount on file.
The recent success of the SPAC product has brought in lots of new demand on both the front and the back end. So it’s no surprise that issuers have rushed in to fill the void. But the amount on file is massive. Here’s a chart for some context — you can see that the $9.2bn currently on file to IPO will increase the amount of capital in active SPACs’ trust accounts by nearly 30%!
We’ll see in a month or so when 13Fs drop for the end of Q2, but recent price appreciation may have caused SPAC arb funds to be net sellers of the product. If so, that’s likely freed up ample capital to deploy to new offerings and contributed to IPO demand right now. Meanwhile, of last week’s seven new S-1’s, six included warrant coverage of 1/3 or less and one included no warrants at all. So it appears the trend of declining warrant coverage is alive and well.
We’ve never seen so much paper issued all at once, so its fair to wonder what effect this crop of IPOs will have on the market. Historically, bankers have kept new issuance at a measured pace, collectively holding the number of SPACs on file somewhere between five and ten. But those bankers are the ones most in touch with front-end demand, and they’re actively engaged in ensuring a stable book for each of their offerings. In opening the flood gates to new issuance, they’re likely responding to what the market is telling them at the moment. We’ll know more this week about how tight allocations were when we see how the upcoming group of IPOs trades in the open market.