The SPACtacular Rise of the Special Purpose Acquisition Company: A Retail Investor’s Worst Nightmare

The special purpose acquisition company, or SPAC, is a company with no commercial or operating history that has listed on a stock exchange with the sole objective of raising financing to identify and acquire another company.   SPACs developed after the SEC curtailed penny-stock blank-check companies and have recently achieved cult-like status.  In 2020, SPACs accounted for most of the money raised through IPOs on U.S. exchanges.  SPACs are also big business in the M&A world, completing nearly $80 billion worth of acquisitions in 2020 alone, and it is not surprising that non-U.S. exchanges are falling over themselves to take a … Read more

More Than Meets the Eye: Reassessing the Empirical Evidence on U.S. Dual-Class Stock

Since Google (now Alphabet) issued dual-class stock at its IPO in 2004, the subject has been vigorously debated throughout the world.  Unlike firms whose shares all have equal voting rights (“one-share, one-vote firms”), companies with dual-class stock allow a founder to attach enhanced voting rights to the shares that he or she holds, while issuing shares with inferior voting rights to public stockholders.  All classes of such stock possess equal rights to share in the cash-flow of the corporation, thereby creating a divergence in voting and cash-flow rights in the capital structure of the company.  Dual-class stock therefore enables a … Read more