SPACS HAVE GAINED TRACTION, BUT FACE A PERCEPTION GAP VERSUS IPOS AND INVESTOR DESIRE FOR ADDITIONAL REGULATION
June 22, 2021, New York, N.Y. – Today, Edelman announced the findings of a new special report, "Going Public: Evolving Investor Expectations for New Issuers,” that uncovers institutional investor perceptions on the IPO and SPAC markets and examines the factors that influence investment decisions.
“Over the last twelve months, the markets have witnessed record IPO and SPAC activity and widespread excitement for new listings,” said Ted McHugh, Edelman’s Head of Investor Relations. “While many have questioned the longevity of this surge, our data shows that investors remain engaged and have a strong appetite for new issuers – particularly those in the financial and technology sector. However, as institutional demand moderates over time, new issuers will have to work harder to sell their investment story to ensure a successful transaction and achieve a premium valuation. As companies look to go public, it is also clear they must continue to emphasize their long-term growth prospects, brand positioning, and the credibility of their board.” Notable highlights from the special report include:
IPO/SPAC BOOM IS EXPECTED TO MODERATE
Nine in ten institutional investors say the IPO and SPAC surge will end within the next year. At the same time, investor appetite for new issuers remains strong, with 88% of investors “likely” and 38% “very likely” to invest in IPO, SPAC or a newly public company in the next year.
SPACS ARE GAINING TRACTION BUT INVESTORS WANT ADDITIONAL REGULATION
Eighty-eight percent of investors agree that the investment profiles of companies that are going public through SPAC transactions has improved over the last one to two years. However, 91% of investors say the investment profiles of companies going public via IPO are stronger than those going public via SPAC. Additionally, 85% of investors say the SPAC industry requires additional regulation from the SEC.
FINTECH AND TECH ARE GENERATING THE MOST INVESTOR INTEREST
Investors selected financials, followed by tech as the top sectors their firm is the most interested in investing via an IPO or SPAC.
INVESTORS WANT FINANCIAL GUIDANCE
Fifty-two percent of investors say annual guidance is the preferred metric for a newly public company to provide guidance for, ranking higher than quarterly guidance at 32% and long-term at 16%.
CORPORATE GOVERNANCE IMPACTS INVESTORS’ WILLINGNESS TO INVEST
Eighty-one percent of investors say the credibility/quality of the board has a positive impact on their willingness to invest in a company going public.
ESG CAN’T BE PUT ON THE BACKBURNER
Ninety percent of investors expect a company to have a clearly defined ESG strategy within its first year of being a public company.
ABOUT THE EDELMAN SPECIAL REPORT
The Edelman Special Report: Going Public: Evolving Investor Expectations for New Issuers surveyed 100 U.S. institutional investors from May 3 to May 14, 2021. Institutional Investors are defined as those who are employed full time in finance, currently work for an institution that pools money to purchase investments, and directly contribute to the decisions made regarding an institution’s investable assets. Investors surveyed in this report have also researched, invested, or otherwise participated in an activity related to IPOs, SPACs, and newly public companies within the past two years.
ABOUT EDELMAN’S FINANCIAL COMMUNICATIONS PRACTICE
Edelman’s Financial Communications & Capital Markets team helps public and private companies promote and protect their reputations as well as navigate complex financial issues and situations with unmatched global scale.
We position clients within the financial community during normal-course business and in transformative periods – including M&A, IPOs and spin-offs, crises, and shareholder activism.
We also serve as a strategic communications partner to investment banks, brokerage firms, real asset investors, hedge funds, private equity and venture capital funds, exchanges, and other institutional market participants. Our work is designed to inform investors, manage issues, and bridge divergent stakeholder needs with an aim of building trust and enterprise value.
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