The SPAC Bubble May Burst—and Not a Day Too Soon

(This op-ed was first published in The Wall Street Journal on January 4, 2020.)

charging bull in New York

The hot new way to take companies public hurts most investors, and its track record is now clear.

There’s a growing fad on Wall Street: special-purpose acquisition companies, or SPACs. Touted as a better way to take companies public, SPACs have raised more equity in 2020 than over the entire preceding decade. But please, take a minute before jumping in—our research suggests that this trend will end poorly for a large majority of investors.

A SPAC is a shell company that a “sponsor” investor or group organizes and takes public in an initial public offering. Once public, the company has no operations.

(Continue reading the op-ed on The Wall Street Journal’s page here.)

Michael Klausner is a professor at Stanford Law School. Emily Ruan is a management consultant in San Francisco. Michael Ohlrogge contributed to this op-ed.

Read Klausner’s forthcoming article “A Sober Look at SPACs”