Maybe SPACs Are Really IPOs

A popular and approximately true thing to say about special purpose acquisition companies is that a company that goes public through a SPAC can tell investors its financial projections, while a company that goes public through an initial public offering can’t. If you merge with a SPAC, the thinking goes, you can market yourself to investors based on projected future revenue and income; if you do a regular IPO (or a direct listing), you can only tell investors about your past financial results.

Lots of companies would like to go public but don’t have much in the way of past financial results. If you are, say, an electric-vehicle company with some good ideas and smart engineers but no actual revenue, or cars, it is much more pleasant to tell investors how much money you plan to make in 2024 (lots) than it is to tell them how much money you made in 2020 (zero, or realistically a very negative number1). And so certain types of companies — relatively immature pre-revenue companies, and particularly electric-vehicle startups — prefer to go public via SPACs, and the extreme boom of SPACs in 2020 and 2021 has been very good for taking those sorts of companies public.