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The purpose of this paper is to study how institutional characteristics of specified purpose acquisition companies (SPACs) are related to their post-merger survival. SPACs are unique financial firms that conduct the initial public offering (IPO) with the sole purpose of using the proceeds to acquire another private company. The paper finds that institutional characteristics of SPACs are important in determining post-merger outcomes of new company, specifically when it comes to their survival/failure, i.e., increases in pre-merger commitment by SPAC stakeholders and initial positive market performance increase post-merger survival likelihood; on the contrary, mergers with higher transaction costs and focused on foreign companies exhibit increased likelihood of failure.

Using unique sample of companies conducting an IPO, namely, SPACs, with the sole purpose to execute an acquisition in the future date within limited time, this paper presents additional evidence on the survival and acquisition frequency of IPOs, and determinants of these choices.

Observing unique set of specified purpose companies, this paper documents that SPACs’ failure rate is at the level of 58.09 percent, higher than any previously reported failure rate in the post-IPO survival literature and comparable only to failure rates found by Hensler et al. (1997) at 55.10 percent for general companies. In addition, the paper documents similar findings to Bhabra and Pettway (2003) that prospectus and market characteristics of original companies have predictive power with respect to survival.

This study extends the literature on post-IPO survival in following ways. First, the paper documents survival rates for unique set of companies organized with the sole purpose to acquire another company. Second, the paper presents evidence on how institutional characteristics of SPAC determine their post-merged outcomes, specifically when it comes to their failures. Finally, paper contributes to the scant literature on SPACs providing new evidence on their post-merger outcomes and performance.

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.

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) regulatory notices issued from September to November 2008.

The paper provides excerpts from FINRA Regulatory Notice 08‐54, Guidance on Special Purpose Acquisition Companies; Regulatory Notice 08‐62, Limit on Close Case Submissions; 08‐66, Retail Foreign Exchange; and 08‐70, FINRA Investigations.

Notice 08‐54: Special purpose acquisition companies (SPACs) are shell companies that raise capital in initial public offerings (IPOs) for the purpose of merging with or acquiring an operating company. Notice 08‐62: Effective November 24, 2008, FINRA will limit the circumstances under which parties may make submissions to arbitrators in closed cases. Notice 08‐66: The retail over‐the counter foreign currency exchange (retail forex) market is opaque, volatile and risky. Broker‐dealers who engage in forex business with their retail customers must comply with the FINRA rules that apply to those activities. Notice 08‐70: FINRA is issuing this guidance to apprise firms of the circumstances in which extraordinary cooperation by a firm or individual may directly influence the outcome of an investigation.

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends. The FINRA staff is aware of this summary but has neither reviewed nor edited it. For further detail as well as other useful information, the reader should visit www.finra.org

This study aims to investigate the effects of the intended use of initial public offerings (IPO) proceeds that is disclosed in the prospectus on IPO initial returns.

A sample of IPOs listed on Bursa Malaysia from 2005 to 2015 is used. The intended use of IPO proceeds is categorised into three uses, namely, growth opportunities, debt repayment and working capital. In addition to ordinary least squares regression, the study applies a more sophisticated and robust approach using the quantile regression technique.

The results show that the intended use of IPO proceeds for growth opportunities and working capital is positively associated with IPO initial returns, whereas debt repayment is negatively associated with IPO initial returns. When the intended use of IPO proceeds for growth opportunities is further expanded into capital expenditure (CAPEX) and research and development (R&D), the intended use of IPO proceeds for CAPEX is positively associated with IPO initial returns, whereas R&D is negatively associated with IPO initial returns.

These findings suggest that intended use of IPO proceeds provides useful information about IPO initial returns and investors can use this information as guidance to make informed decisions. In addition, regulatory authorities should pay close attention to the amount allocated to each intended use of IPO proceeds as this may play a critical role in the success of a company and the economy.

This study gives new empirical evidence on the desire and motivations of IPO and the usefulness of designated use of IPO proceeds disclosed in the prospectus in explaining IPO initial returns.

This paper aims to explain the fundraising and valuation processes of startups and discuss the conflicts of interest between entrepreneurs, venture capital (VC) firms and stakeholders in the context of startup corporate governance. Further, this paper uses the examples of WeWork and Zenefits to explain how a failure of stakeholders to demand an external audit from an independent accounting firm in early stages of funding led to an opportunity for fraud.

The methodology used is a literature review and analysis of startup valuation combined with the Fraud Triangle Theory. This paper also provides a discussion of WeWork and Zenefits, both highly visible examples of startup fraud, and explores an increased role for independent external auditors in fraud risk mitigation on behalf of stakeholders prior to an initial public offering (IPO).

This paper documents a number of fraud risks posed by the “fake it till you make it” ethos and investor behavior and pricing in the world of entrepreneurial finance and VC, which could be mitigated by a greater awareness of startup stakeholders of the value of an external audit performed by an independent accounting firm prior to an IPO.

An implication of this paper is that regulators should consider greater oversight of the startup financing process and potentially take steps to facilitate greater independence of participants in the IPO process.

Given the potential conflicts of interest between VC firms, investment banks and startup founders, the investors at the time of an IPO may be exposed to the risk that the shares of the IPO firms are overvalued at offering.

This study demonstrates how startup practices can be extended to the Fraud Triangle and issue a call to action for the accounting profession to take a greater role in protecting the public from startup fraud. This study then offers recommendations for regulators and standards entities.

There are few academic papers in the financial crime literature that link the valuation and culture of startup firms with fraud risk. This study provides a concise explanation of the process of valuation for startups and highlights the considerations for stakeholders in assessing fraud risk. In addition, this study documents an emerging role for auditors as stewards of proper valuation for pre-IPO firms.

Australian Securities Exchange (ASX) initial public offerings (IPOs) are an important source of early-stage capital and have also driven a substantial increase in main-board listed companies post-millennium. By contrast, Australian venture capital (VC) funding has remained largely dormant. The opposite has occurred in the US: IPOs have fallen by half, and VC funding has surged. The authors examine the reason for this divergence between ASX IPO and US VC systems that, with their supporting ecosystems, have many features in common and function similarly. The authors explore the potential factors that could explain the US VC surge vis-à-vis Australia's VC stagnation.

The authors’ analysis is predominantly qualitative. The authors describe the Australian listing process and its similar features and functions as for the prototypical VC. The authors also describe the developments in US VC driving its recent exceptional surge and highlight that such developments have not yet materialised on the Australian scene, where early-stage IPOs have served as a substitute.

The ASX's structure and ecosystem have been critical to its success in fostering early-stage main-board listings. While the US has succeeded in alternatively growing VC, there is an increasing concern that the latter has occurred partially because valuations are stretched, tax concessions for carried-interest capital gains are too high and corporate control benefits are becoming increasingly diluted. These developments could have important implications for Australia, where VC structures are currently being reviewed.

To the best of the authors’ knowledge, no prior study has attempted to bridge the broad differences in IPO and VC funding trends for early-stage companies in Australia and the USA.

The restructuring of shipping and shipbuilding companies in the midst of rapidly shrinking global shipping demand has become a prominent issue in Korea. In shipping finance, loan syndication featuring many creditors surges as the preferred option. However, increasing the numbers of creditors in the syndicate results in two opposite effects. First is the beneficial effect from their enhanced monitoring power. On the other hand, there is the adverse effect resulting from increased difficulty in coordination when syndicate members increase, particularly in bankruptcy. Our aim of this paper is to analyze the role of finance in the shipping and shipbuilder markets, and determine the theoretical optimal number of creditors for the shipping finance syndicate based on Bolton and Scharfstein (1996). The two issues above result from moral hazard and non-verifiability: coordination among many creditors for collection of bonds in case of default, and the enhancement of monitoring private benefit exploitation by the ship-owner during default. Considering the two conflicting forces result from an increase in creditor membership, we draw conclusions on determining the optimal number of creditors by considering trade-offs between these two factors: More creditors are preferred when the monitoring effect dominates. Otherwise, less creditors are preferred.

This study aims to examine institutional ownership of companies that go public with dual-class share structures.

Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures.

Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions.

This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.

This study aims to investigate the valuation accuracy of Malaysian initial public offerings (IPOs) by using price-multiple methods.

Cross-sectional data including 467 IPOs listed on the Malaysian stock exchange were used for the period of 2000–2017. This study used univariate ordinary least square (OLS) regression to analyse the relationship between IPOs’ price-multiples and comparable firms’ price-multiples. The test of valuation accuracy was conducted via computing valuation errors by segregating the sample into two groups: fixed-price IPOs and book-built IPOs. Furthermore, multiple OLS regression was used to examine the influence of IPO valuation on underpricing.

The findings of the results suggested that IPOs price-to-earnings (P/E), price-to-book (P/B) and price-to-sales (P/S) multiples were positively related to the median P/E, P/B and P/S multiples of five comparable firms matched by industry and revenues. The P/S multiple was shown to be the most significant valuation method, specifically in book-built IPOs. The findings indicated that those firms that had a lower valuation in comparison to the comparable firms were inclined to underprice their IPOs to allure investors to subscribe IPOs. In addition, book-built IPOs that had fair valuations were inclined to generate higher initial returns for investors.

The findings of this study observed implications for underwriters in avoiding the mis-valuation issue by considering the book-building mechanism.

This study attempted to explore the suitability of the valuation method to value IPOs in Malaysia.