SPACs, or special purpose acquisition companies, are shell companies that are used as vehicles to acquire or merge with another company using the proceeds of the SPACs IPO.
Fusion Acquisition Corp, which trades under the ticker FUSE.UT, is one such SPAC.
CEO John James joined TheStreet's Katherine Ross to discuss the popularity of SPACs and why the company is specifically eyeing companies in the FinTech space.
Watch the full video above for more.
SPACs, or special purpose acquisition companies, have become a popular way for companies to go public with 59 SPAC IPOs just last year. Joining me today is Fusion CEO, John James. John, why are we seeing such a rise in SPAC IPOs? I mean, we've seen over 25 companies being taken public via SPAC this year alone.
That's a good question. I think there are a few reasons why we're seeing a rise in SPACs. I guess from the early days, we've seen a development in the actual product of the SPAC, and a change in regulation to really make them more appealing to investors as a whole. I think also particularly with a volatile market, we've seen that SPACs have provided some stability in terms of cash sitting in trust and giving investors the opportunity to basically hold their investment with the optionality of making future returns on a good and solid business combination down the track.
Fusion is a SPAC and you guys are aiming for a FinTech company, correct?
We are. I mean, our primary focus is FinTech wealth and asset management, but really, I guess what we see even across those traditional sectors is that FinTech permeates the whole of the wealth vertical, and we really see FinTech being the growth driver across that vertical.
If I'm a younger investor with limited funds, why should I consider investing in a SPAC or looking at them and researching them?
Look, I guess it probably goes back to what I said previously, which is that SPACs provide a sound vehicle with liquidity down the track, should an investor want to choose to have that optionality. And really you're getting in at an early-ish stage with a solid business, a growth business, typically not a turnaround. And you've got that opportunity really to hear the story of that company as it comes to market, which you don't necessarily get with a traditional IPO, so the company can tell its narrative to you because they're not constrained by regulation in the same way that you would be with a traditional IPO. And as such, it really gives you the chance to do your digging and your research on the business before you make the plunge to invest.
I want to touch on something that you just said, which is that you kind of, as a retail investor, you get to hear more of a story from these companies. And I think that that's one thing, as you said, that gets lost in the IPO process, which is really reaching out more to corporate investors. So based on that, do you think that even when we see the markets return to normal, post-pandemic, that we're going to see a rise in SPACs, because you can speak directly to these younger investors who care about the company?
Yeah. I would say they're here to stay now. I think they have become a very appealing way to go public for all sorts of businesses. And in fact, we're seeing it in the companies that we're talking to, but we're certainly hearing as well from other companies, or other SPACs, that the companies are almost approaching SPACs now to use them as a means to go public. And I think really, that is, a lot of that is because of the regulatory advantages, and being, a company, basically, being able to tell their story and get a real valuation for their business, as opposed to a somewhat constrained story that is told with a traditional IPO.
You can follow Katherine Ross on Twitter at @byKatherineRoss.