Why SPACs have been a lifeline for ambitious small companies

CIO explains why resurgence of vehicle has been a boon for some after years of avoiding costly IPO process

Why SPACs have been a lifeline for ambitious small companies

The SPAC revolution has been a “breath of fresh air” for the next generation of entrepreneurs challenging the oligarchic mega-companies that have thrived in recent years, according to one CIO.

Gerry Frigon, president and CIO at Taylor Frigon Capital Management, believes the landscape is changing for the better as companies previously put off going pubic by the weight of regulation, now see a less obstructive avenue to investment and growth.

From the late 1990s to 2000 era to roughly 2020, the number of public companies declined from more than 8,000 to a low near 4,000. Frigon, who manages US$420 million, said: “There have been many different reasons offered for why this has happened, but we have spoken to enough small, entrepreneurial private companies over the last 15 years to squarely put the blame on government regulations that have made it too cumbersome and expensive to become a public company.  

“From Sarbanes/Oxley to Regulation Fair Disclosure to even the NASDAQ trading settlement of the late 1990s, and more – all these have had a role.”

Now, though, small companies and their enterprising owners have found a new route through SPACs – an old, relatively obscure vehicle. And while this is not always less expensive than going public, Frigon said the regulatory burden and requirements involved for a small company going through the initial public offering (IPO) process makes it an extremely attractive options for many, particularly those in the technology space

He added: “The SPAC has been a welcome breath of fresh air to public markets sorely needing more publicly-traded, small companies that can be an investment opportunity for everyday people trying to get a return on their hard-earned money before these companies become huge.  

“And, of course, these companies going public through the SPAC process are often the innovative young guns that will challenge the oligarchic mega-companies that have thrived in the preceding period of drought for small companies coming public, allowing those oligarchic titans to dominate all levels of our culture, politics and everyday life in ways that are not always desirable.  

“Look out Amazon, Apple, Google, Microsoft, Facebook, et al: here comes your competition.”