New York Corporate partner Brian Hecht spoke to Law360 about the increase in Special Purpose Acquisition Companies (SPACs) mergers featuring electric vehicle manufactures, a trend that has accelerated in the wake of the COVID-19 pandemic and global efforts to lower carbon emissions to combat climate change.
Known as blank-check companies, SPACs raise money through initial public offerings in order to take a private company public. For example, in March 2020 zero-emission truck manufacturer Nikola Corp. announced plans to merge with VectoIQ Acquisition Corp. in a $3.3 billion transaction that resulted in Nikola's stock being traded on the Nasdaq.
"The Nikola deal was a turning point for a lot of people," Brian explained. "The way that stock performed, and the way the market reacted to that transaction, put a big spotlight on this particular industry as being something that could fit nicely with the SPAC model."
An important benefit of SPAC transactions, Brian said, is that they allow clients to take control of the value and timing of the deal, in comparison to traditional IPOs.
"As compared to a traditional IPO, the SPAC path allows for a relatively more stable timeline," Brian said. "You can map out how long it is from starting the conversation to signing and closing the deal with a pretty good amount of confidence."