The IPO market is on pace to be the hottest in 20 years, with half of the volume coming from sizzling SPAC deals. But as more and more SPACs appear, investors should be increasingly careful about which ones they consider buying.
That’s according to IPO Edge Editor-in-Chief John Jannarone, who spoke to Cheddar TV’s Azia Celestino in an interview Monday. Jannarone cited Dealogic data showing $91 billion in deals done so far in 2020, with $40 billion coming from SPACs.
Jannarone pointed out that the success of a few flashy deals, notably Virgin Galactic Holdings, Inc., Nikola Corporation, and DraftKings, Inc., sparked interest in fast-growing companies going public via SPACs. But many of those companies, while potentially disruptive, are years away from even booking revenue and have mixed odds of success.
Among electric vehicle makers, for instance, it’s important to closely evaluate business models and track records. One EV that stands out as a likely winner is Canoo, which is going public in a merger with Dan Hennessy’s Hennessy Capital Acquisition Corp. IV (ticker: HCAC). Canoo is run by a BMW veteran and already has a fully-developed vehicle along with revenue from a deal with Hyundai. IPO Edge published a detailed analysis, explaining the benefits of commercial uses for last mile delivery, which could involve a deal with a major player like Walmart or Target.
Investors should also consider a completely different kind of model with ARKO Corp., a major convenience store chain going public with Andrew and Steven Heyer’s Haymaker Acquisition Corp. II. The company continues to benefit from opportunities to consolidate corner stores, which are highly fragmented and can become far more profitable in ARKO’s hands. IPO Edge published an analysis of the ARKO deal, which also explains why convenience stores face minimal risk from e-commerce.
The full Cheddar TV clip is available here:
John Jannarone, Editor-in-Chief