Jumpstart our SPAC IPOs? Unintended consequences of the JOBS Act

Prior to the JOBS Act of 2012, being acquired by a Special Purpose Acquisition Company (SPAC) was viewed as a cheaper and quicker way for companies to go public compared with a conventional IPO. The reduced disclosure and compliance provisions of the JOBS Act, however, were intended to level the field by reducing the direct costs associated with conducting IPOs. Despite this, SPAC activity has surged in the years since JOBS. We contribute to understanding this unintended consequence by showing that while JOBS did not result in reduced issuance costs for conventional IPOs, the direct costs to sponsors of SPAC IPOs reduced significantly. We confirm the robustness of this principal result using a difference-in-difference analysis. Since SPACs have no underlying operations at the time of IPO, they are particularly well poised to exploit the JOBS Act provisions, reducing costs and increasing attractiveness to SPAC sponsors. We also report that post-IPO performance of SPACs has worsened in the post-JOBS era, indicating that the revived IPO market may have adversely affected SPAC investment opportunities.