SPAC IPO waves

Magnus Blomkvist and Milos Vulanovic

Economics Letters, 2020, vol. 197, issue C

Abstract: We examine the wave pattern of U.S. SPAC IPOs using a hand-collected data set of the entire SPAC population since their emergence in 2003. We find that both the SPAC volume and SPAC share of total IPOs are negatively related to market-wide uncertainty (VIX) and time-varying risk aversion (variance risk premium). We attribute our findings to risk-averse investors’ reluctancy to invest in opaque securities. In response, the SPAC sponsor can credibly signal the issue’s quality by increasing their “skin in the game” through the purchase of additional warrants.

Keywords: IPO; SPACs; Time-varying risk aversion; Uncertainty; Variance risk premium; VIX (search for similar items in EconPapers)
JEL-codes: G14 G24 G34 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:197:y:2020:i:c:s0165176520304055

DOI: 10.1016/j.econlet.2020.109645

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