Finance

Credit Suisse boss sees Spac boom raging on amid $100bn blank-cheque frenzy

Credit Suisse chief executive, Thomas Gottstein, says the boom in so-called blank-cheque companies that have raised over $100bn in the past year will continue as the deal frenzy spreads beyond the US.

The Swiss bank tops the investment banking league tables for special purpose acquisition vehicles (Spacs), which exploded in popularity during the pandemic. Gottstein’s comments on the Spac boom contrast with those of Goldman Sachs chief executive David Solomon, who said during the bank’s 2020 earnings call that the craze was not “sustainable in the medium term”.

“What we are seeing now is more and more Spacs outside the US, particularly Asia,” said Gottstein on a call with journalists accompanying the bank’s 2020 annual results.

“I do think it is a trend that will continue,” he added. “Will it be sustainable at the levels we saw in 2020 and the start of 2021? We will have to see.”

READ It’s not just Wall Street: Bankers gear up for European Spac boom

Gottstein added that Credit Suisse was “leading the charge” advising on Spac IPOs, which had helped elevate the bank’s position in the IPO league tables globally. The Swiss bank jumped from sixth to the top of the IPO rankings in 2020, advising on $21.4bn worth of deals, according to data provider Dealogic.

“While I think these activity levels continue to be very robust,” Solomon said on 19 January. “I do not think this is sustainable in the medium term, there’ll be something that will … in some way, shape or form bring the activity levels down, you know, over a period of time.”

Spacs raise money from investors on public markets in order to fund the acquisition of private companies. Banks made $3.4bn in fees from advising on Spac IPOs last year, almost all in the US, which is five times more than they have ever made from such products in any year. A record $78.2bn was raised in the US via Spac IPOs last year, with a further $24.1bn raised so far in 2021, according to data provider Refinitiv.

Bankers are anticipating a surge in Spac IPOs in Europe this year, as the trend spreads beyond the US. In the past week, three European Spacs have been unveiled including one led by former UniCredit chief executive Jean Pierre Mustier teamed up with LVMH founder, Bernard Arnault.

READGoldman Sachs CEO says the Spac boom is not ‘sustainable’

On 17 February, German tech investor Klaus Hommels on Wednesday launched a special purpose acquisition company through his venture capital firm Lakestar, which will look at snapping a late-stage European tech company worth between €750m and €4bn. It is the first European Spac to follow a US-style structure.

To contact the author of this story with feedback or news, email Paul Clarke

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