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The historic SPAC boom in 2020 is more than just a fad, Goldman Sachs said. For investors wanting to cash in on the red-hot market, the firm said it identified a key element in winning blank-check deals.
Special purpose acquisition companies are an investment vehicle that goes public without having a real business. The goal is to raise funds to finance a merger or acquisition typically within two years.
Funds raised via such blank-check deals have totaled a record $70 billion this year, a remarkable fivefold increase from last year, according to Goldman. The total of 206 SPAC deals this year account for 52% of the IPO capital raised in the U.S. in 2020, the bank said.
"We expect a high level of SPAC activity will continue into 2021," David Kostin, Goldman's head of chief U.S. equity strategy, said in a note. "Increased retail trading activity has also boosted interest in early-stage SPAC targets. SPACs have low opportunity cost for investors when policy rates are near zero."