Last January, Teeka Tiwari predicted a market shift he said would rival the $62 billion tech boom we saw in the 1990s. That’s when big-name tech giants like Nvidia and Amazon went public.
And Big T doesn’t make these predictions lightly…
Thanks to extensive research and his network of CEOs and Wall Street insiders, he saw a trend forming in a corner of the market that Main Street often overlooks.
A trend that makes venture capitalists (VCs) and Wall Street millions of dollars year after year… while everyday investors are left fighting over scraps.
I’m talking about initial public offerings (IPOs). That’s when a private company lists on a public exchange like the NYSE or Nasdaq.
At the time of his prediction, IPOs had raised an incredible $65.4 billion in proceeds. And while the overall number of IPOs had fallen versus the year before… Big T and I knew this trend would continue into 2020.
There was pent-up demand for exciting, high-growth private companies. And Wall Street isn’t exactly known to pass up billion-dollar opportunities…
So, how did his 2020 prediction play out?
It was a record year for IPOs. At the close of 2020, 480 companies went public, raising roughly $175 billion in proceeds. And this year could be even bigger.
In just the first month of 2021, we’ve seen 26 companies go public for a total of about $14.8 billion in proceeds… That’s a 188% increase in the number of IPOs over the same period last year. And we’re only one month in to 2021.
But there’s a kind of IPO that we believe will do even better this year. It’s a backdoor way for investors to make life-changing gains before a company goes public.
A Different Way to Go Public
You’ve surely heard of Nikola, DraftKings, and Virgin Galactic…
These IPOs got plenty of fanfare. They shot up as much as 882%, 555%, and 395%. Except, they weren’t traditional IPOs. They went public via a SPAC – the special type of IPO I mentioned above.
SPAC stands for special-purpose acquisition company. It’s also called a “blank-check company” or “shell company.”
These shell companies go public and raise money for the sole purpose of acquiring an attractive private company with explosive upside, taking it public in the process.
While they’ve been around for decades, SPACs aren’t nearly as well-known as traditional IPOs – mature companies that have private investors looking for exits.
SPACs, on the other hand, target companies in the earlier stages of their growth cycles. That means they have even more upside potential.
Plus, the IPO process is expensive. Underwriters, regulators, accountants, attorneys, and exchanges all collect fees. All in, the pricing process has cost about 7% or more of total funds raised for traditional IPOs. And the process can drag on for 6–12 months – or longer.
In contrast, the SPAC process can take as little as 3−4 months. And the expenses average 3−4% of total funds raised. That’s about half the cost of a traditional IPO.
Plus, the private company negotiates an exact acquisition price. It doesn’t leave any money on the table.
This SPAC route has opened the door for private companies that haven’t been large or well-known enough to tap public markets in previous years. And without a doubt, 2020 was the year of the SPAC.
As you can see in the chart, 168 SPACs raised over $82 billion in 2020. That’s 3x the number of SPACs − and almost 6x the proceeds – than 2019. Drilling down deeper, they’ve raised more proceeds this year than the last 13 years combined.
SPACs were on fire in 2020… And that trend is only growing stronger in 2021.
The SPAC-IPO Boom Is Just Getting Started
Based on our research, nearly 300 SPACs are hunting out targets in hot sectors like technology and electric vehicles this year. And billions of dollars will flow into these deals in the coming months.
In January, we’ve already seen 34 SPACS launch. At this pace, 2021 will crush the record we saw in 2020.
Look, the reality is mom-and-pop investors don’t have easy access to pre-IPO deals. You have to be a celebrity, a top hedge fund manager, or part of the Wall Street elite to get an allocation to a private company before its IPO.
Or you’d need to do tons of research on your own and build your own network of insiders to find the best pre-IPO deals. (That’s what Big T and I do on your behalf in our pre-IPO service, Palm Beach Venture.)
However, SPACs give Main Street investors backdoor exposure to the pre-IPO market… and they don’t require you to be a millionaire or well-connected insider. Consider adding them to your investment radar today.
Analyst, Palm Beach Daily