In 2021, about 200 businesses merged with special purpose acquisition companies as a way to go public. Hippo Holdings, an insurtech, now wishes it hadn’t taken part in the so-called SPAC euphoria, Fortune reports.
Hippo was valued at $5 billion in March 2021 when it announced its combination with Reinvent Technology Partners Z, a SPAC backed by Reid Hoffman, cofounder of LinkedIn, and Mark Pincus, founder of Zynga. SPACs, at the time, were wildly popular due to the advantages promised by blank-check companies. Merging with a SPAC was believed to be a quicker, and cheaper, route to public markets compared with a traditional IPO. Companies using SPACs could also provide future guidance, which is not allowed with traditional offerings.
The SPAC euphoria came to a brutal halt when a broad market downturn resulted in fewer IPOs. The Securities and Exchange Commission has also increased oversight of the sector, proposing a sweeping set of rules in March that would effectively even the playing field among IPOs and SPACs. Read more.
