The recently concluded Ambrosetti Forum in Cernobbio once again brought the major issues of the moment, from the complexities of the geopolitical chessboard and fears of economic stagflation to risks and solutions for the future, to the attention of an international audience.
I am convinced that, in a context that has never been as complicated as it is today, the role of investment will remain a cornerstone. The question is always the same: how can we stimulate but also efficiently channel financial resources to profitable economic activities?
In this regard, I would like to devote a brief discussion to a very interesting investment instrument that has been active in the U.S. market for some time now, but, perhaps, that is still in the twilight in the European market. I’m referring to the SPAC, which stands for Special Purpose Acquisition Company. This is a mode of investment similar to classic private equity, but much more flexible and, for this very reason, it is gaining momentum in the States.
Despite being a tool that has been around for a few years, the European market, is still proving lukewarm to this mode of investment. This is not only proven by the figures, which are markedly undersized in Italy and Europe compared with the U.S., but also by the attention given to SPACs. Although they have existed since 2005 and arrived in Italy in 2011, they have never been the focus of financial debate.
It is hard to say what the coldness toward SPACs is due to. It is an instrument that offers several advantages, in the face of the risks typical of any investment in high-growth-potential and highly information asymmetrical realities. It should be mentioned that the only elements capable of determining the degree of risk of the operation undertaken through the SPAC are, on the one hand, the expertise of the investment promoters and, on the other hand, the strength of the bond of trust with the promoting partners, who are called upon to be credible and responsible figures, especially in the choice of the target company. Not surprisingly, the promoter is often an individual professional with extensive experience and an excellent reputation in the market.
SPAC is a vehicle that aims to aggregate investors to make investments in one or more target companies. There are four steps in the process: the establishment of the SPAC based on a project proposed by the promoter(s), the conduct of the IPO to raise capital, the search for the target company, and finally the actual investment transaction. The last step may not even take place if there is no longer the necessary consensus among the partners or there are problems with the target company. Once again, we see how it is crucial to rely on authority figures in this area who can operate wisely and as profitably as possible.
Perhaps Europe and Italy are not yet ready to make this leap, but the path is certainly the one already traced by the United States, where 50 percent of IPOs involve SPACs. A very large figure that demonstrates the potential scope of the phenomenon for the Old Continent as well.
At the moment we are in, with a war on Europe’s doorstep, the price of energy commodities virtually out of control and economic growth that has become a major question mark, SPAC represents an arrow a plus that it is good not to leave unused.
Once again, the experience of the States can come to our aid and can be an example for the European context, not forgetting, however, that it is always skills and confidence that make the difference. Moreover, trust cannot go without a good reputation, substantiated by concrete actions.