New SPAC listings went on a rollercoaster ride through 2021. The first quarter saw 278 SPAC IPOs in the US, raising US$92.8 billion. This fell significantly to 51 listings, raising US$11.8 billion in Q2 as the SEC indicated it would take a tougher approach to regulating SPACs. New SPAC IPOs then rose again in Q3, with 77 listings worth US$15.7 billion and then in Q4, with 144 listings worth US$29.2 billion.

While the signs are that the IPO pace may pick up a little in 2022, the main story of the year will be what happens with de-SPAC mergers. These declined over the second half of 2021, from 122 mergers worth US$253.4 billion in H1 to just 86 valued at US$162.3 billion in H2.

With so much capital seeking deals and the requirement to complete transactions within the usual two-year timeframe, competition will be strong for high-quality companies. It is likely that those with some experience and track record with SPACs will be most successful in finding the strongest deals and generating interest from PIPE investors.

Although the technology and life sciences sectors will continue to be the primary picking grounds for SPACs, there is now some interest in more traditional industries. Among the largest transactions of the year was the US$9.2 billion merger of Luxembourg-based industrial firm Ardagh's metal packaging business with Gores Holding IV, a SPAC backed by PE firm Gores Group.

SPACs have also been looking for targets beyond US borders, including in Western Europe and Israel, as sponsors and investors have become more comfortable with cross-border transaction structures. India is also becoming an interesting market for mergers, given the scale of its market, the growth of the technology sector and the increasing amount of private equity investment there looking for an exit. De-SPAC deals targeting assets outside of the US jumped from 31 transactions in 2020 to 94 in 2021, while value leaped by an astounding 589 percent year-on-year to US$207.2 billion.

Given recent statements by the SEC, it seems likely that regulatory changes to SPACs will emerge over the next year or two, with potential reform to forward-looking statements and transparency requirements. The overall thrust of any changes would be to bring de-SPAC mergers more in line with traditional IPOs. On the state law front, in In re Multiplan Corp. Stockholders Litigation, Delaware Court of Chancery applied the entire fairness standard of review to breach of fiduciary duty claims brought against the SPAC's directors, officers and its controlling stockholder, due to alleged conflicts between the SPAC's fiduciaries and public stockholders in the context of a value-decreasing transaction. The uncertainty introduced by this decision to the standard of review applicable to a de-SPAC transaction is expected to result in additional litigations.

We're also seeing some creativity emerge in SPAC PIPE fundraising processes. Many investors already have exposure to these investments and so sponsors are looking to make PIPEs more attractive by, for example, offering common shares at a discount to the US$10 price, having some form of warrant attached, or deploying preferred or convertible preferred structures.

Overall, it will continue to be an active market subject to continued evolution through 2022 and beyond.

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