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A story on SPACs

Milan Lakicevic (College of Economics, University of Montenegro, Podgorica, Montenegro)
Milos Vulanovic (Department of Accounting and Finance, Western New England University, Springfield, Massachusetts, USA)

Managerial Finance

ISSN: 0307-4358

Article publication date: 8 March 2013




This paper aims to study characteristics of specified purpose acquisition companies (SPACs) and examine the performance of their securities over time.


Previous findings in literature on SPACs' performance around the announcement of merger date are scarce, not uniform, and mostly address the performance of SPACs' common shares. The authors believe that more insights on merger announcements can be obtained if the perf]ormance of all three types of securities that SPACs issue during the IPO, namely units, common stocks, and warrants are analyzed simultaneously. In order to examine the behavior of these securities we form three samples with daily returns for three distinguished SPAC securities. Results are obtained for abnormal returns based on the market model from Brown and Warner.


It is found that SPACs represent a fairly unique way to raise capital. The incentives of their founders, underwriters, and investors are interdependent and successful business combinations generally result in significant returns to founders. The analysis shows that SPACs have a complex corporate structure in which the incentives of the founders, underwriters, and investors are interdependent and where successful mergers result in significant returns to the founders. It also shows that different SPAC securities do not exhibit similar reactions in response to announcements regarding their corporate status. While holders of all three securities realize positive abnormal returns on the merger announcement day, the strongest reaction is observed among the investors holding warrants, while common stock holders react very mildly.


SPACs are recent phenomena in capital markets and very few papers in finance literature describe them. None of the existing papers evaluated performance of all three types of SPAC securities: units, common shares and warrants before this paper.



Lakicevic, M. and Vulanovic, M. (2013), "A story on SPACs", Managerial Finance, Vol. 39 No. 4, pp. 384-403.



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