SPAC sponsors and their effects on SPAC prices

Abstract

The purpose of this paper is to find the effect from SPAC sponsor after the merger announcement. I study SPAC IPOs which had acquiror and target nation in the United States and were public between January 2020 and December 2021. The final sample has 186 SPACs. I select The Forbes 400 in 2021 as a proxy for sponsor reputation. I use event study methodology to test for SPAC sponsors and their effects on SPAC prices. I find that there is no statistical evidence that sponsor reputation has impact on SPACs price on the announcement date of combination. There are two possible plausible explanations for this finding. 1) SPACs are structured and behave unlike any other asset class in the markets. 2) The Forbes 400 in 2021 that use as a proxy for sponsor reputation in this paper may not be appropriate for the study. Moreover, I cannot find the evidence that SPACs with technology company has impact on SPACs price on the announcement date of combination. Because investor trading behavior is bizarre, and SPACs are structured and behave unlike any other asset class in the markets.