Executive Summary

With a new U.S. administration, an economic rebound in sight and historically low interest rates that are unlikely to budge in the near-term, equity markets have been on a tear since late 2020. The torrid pace of technology and life sciences IPOs, direct listings and special purpose acquisition companies (SPACs) has likewise shown no signs of slowing in 2021.

But the investment community's headlong rush into SPACs has formed a bubble, according to the executives and investors in the economy's hottest sectors-and it will continue inflating well into 2021.

Those are the top-line findings from Fenwick's survey of 366 executives and investors in the technology and life sciences sectors, conducted in January 2021. The survey gauged these key players' perspectives on SPACs, lock-up provisions and other dynamics likely to play prominent roles in shaping this year's IPO landscape.


A SPAC bubble
- but it's not about to burst. More than two-thirds of respondents believe we are in a SPAC bubble already. However, two-thirds of life sciences executives and investors, and nearly 90% of technology executives and investors, expect the SPAC surge to continue.

Lock-ups will begin to fade in the coming years
- and respondents believe companies seeking to avoid lock-ups will increasingly gravitate toward direct listings in the meantime. SPACs also offer a way to go public with fewer shareholders locked up.

Dual-class capital structures are here to stay, in tech
- but the majority of technology investors and executives believe dual-class IPOs will increasingly include mandatory sunset clauses, amid growing pressure from institutional investors and governance advocates. On the life sciences side, where dual-class structures are far less common, executives and investors also say that those structures deter investors, who perceive them as limiting management's accountability.


Following the most active six months for technology and life sciences IPOs since we began tracking them in 2012, the market appears poised for a post-pandemic boom that could rival or exceed last year's. Some of last year's largest offerings may provide a sense of the scale investors and executives expect to see in 2021.

DoorDash raised $3.4 billion in a December IPO following a year in which it saw business spike as COVID-19 restrictions limited, and at times halted, dine-in restaurant service. A few days later, Airbnb's IPO raised $3.5 billion despite the devastation done to the hospitality industry by COVID-19 travel restrictions, indicating that investors expect Americans to hit the road in droves as pandemic conditions ease this year.

"Investors and executives alike are looking at the market's reception of DoorDash, which was seen as a pandemic play, and of Airbnb, which was a recovery play," said Fenwick partner James Evans, co-chair of the capital markets practice. "I think those will be the comp set for many companies."

Our online survey results also indicate that many of those companies, especially in the technology sector, will likely be tempted to go public through a merger with a SPAC as opposed to a traditional IPO process. Two-thirds of the technology executives we surveyed, and nearly as many tech investors, say SPACs' primary attraction is the perception that they help companies reduce the amount of time required for the preparation and disclosures that come with traditional IPOs.

Early activity in 2021 would appear to support their belief: SPACs accounted for 70% of all funds raised through public offerings in January, according to the Wall Street Journal, which also reported that SPACs were launching at an average pace of five per day

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