Companies with blank checks target transactions in the European technology sector

LONDON – The SPAC madness is starting to gain some momentum in Europe.

After a year of advertising for so-called US special procurement companies, a growing number of empty check companies are raising funds with the intention of registering a European technology company.

SPACs are shell companies that are created for the sole purpose of raising funds to acquire an existing private company, so that the target company can bypass the traditional initial public offering (IPO) process.

These empty-checking companies raised a total of $ 78.2 billion in 244 U.S. IPOs last year, according to data from Refinitiv. The US SPAC mania continued until 2021, with another 134 companies raising nearly $ 39 billion since the beginning of the year.

The attraction of SPACs is that they provide a way for companies to quickly track a listing on the stock market. An IPO can be a much longer process, and some companies avoid the traditional way to avoid possible changes in market sentiment. IPOs have also drawn criticism from venture capitalists such as Ben Gurley, who fear they are undervalued.

SPACs offer an alternative to IPOs, as well as direct listings in which firms sell existing shares to public market investors. They often attract high-growth companies. Last year, the British electric vehicle manufacturer, Arrival, announced a transaction that will become public through a merger with a US goal verification company.

Europe has largely missed the SPAC boom. Only three SPACs listed in Europe last year, totaling $ 495 million. And no SPAC has debuted on the continent so far this year.

SPACs are not a new phenomenon, but they will flourish in the US in 2020. Investor funds are held in a trust account after a SPAC completes its IPO and shareholders can vote against the transaction if they do not agree with it. money back.

Industry experts say that SPACs tend to be structured differently in the US than in Europe. And Europe is home to far fewer publicly traded technology companies than America, making it difficult for investors and analysts to make benchmarks and benchmarks in the industry.

The London Stock Exchange is looking to attract more SPACs and has contacted law firms and banks to see if they can facilitate the listing of such vehicles, a source familiar with the matter told CNBC.

The person preferred to remain anonymous because the discussions were not made public.

Meanwhile, the UK has launched a review of its listing rules, in an attempt to attract more technology companies to the market. Europe as a whole had a quiet year of technology IPOs last year, while the US saw a series of major debuts from DoorDash and Airbnb.

“Unfortunately, in Europe, attractive and attractive companies do not have the same access to capital as in the US, either in the private sector or in public markets,” said Makram Azar, CEO of Golden Falcon Acquisition Corp., a SPAC focused on European technology. CNBC on Friday for Street Signs Europe.

“For example, the venture capital fund is much smaller in Europe than in the US, and the IPO market is very weak.”

An increasing number of empty check companies are listed in New York in order to buy a European technology company.

Azar, the former president of banking for Europe at Barclays, raised $ 345 million for his SPAC in an IPO in December. Golden Falcon is looking to take on a European “champion” in technology, media and telecommunications (TMT) or the fintech public.

“There are over 60 TMT and fintech unicorns in Europe,” of which more than 20 are based in the UK, Azar said, adding that he sees “very attractive companies” in the region.

Fintech has been a major asset to the European technology sector over the years. Adyen, a payment company listed in Amsterdam, has seen its share price more than double from year to year. And there are more and more valuable companies in the private markets, such as Checkout.com and Klarna.

Another SPAC, North Atlantic Acquisition Corp., raised $ 379.5 million in IPOs last month. The company is mainly looking for targets in the consumer, industrial and TMT sectors in Europe.

“It’s an exciting market in Europe,” said Gary Quin, CEO of North Atlantic Acquisition Corp. and former vice president of Credit Suisse’s banking investment division in Europe. “We see a number of offers coming from a few different areas.”

Quin said he expects his SPAC to reach an agreement that will be combined with a European firm “sometime between January and two years from now.”

Some European companies are already considering merging with SPAC companies.

One SPAC received more than 10 European technology companies shortly after the IPO, a source familiar with the matter told CNBC. The person preferred to remain anonymous due to the sensitive nature of the discussions.

SPACs are not able to engage potential merger targets until they have been listed.

Europe has often been seen as lagging behind the US and China in terms of technology, but the region is growing rapidly. European start-ups raised a record $ 41 billion in funding last year, according to London-based venture capital firm Atomico.