In 2020, underwriters were the kings of Wall Street.
The biggest investment banks recorded better-than-expected years, even though a global pandemic sent shockwaves through businesses and households. No business grew more than their operations selling stocks.
In the spring, clients bracing for economic trouble turned to stock markets to raise cash. In the latter part of 2020, it was the SPACs—special-purpose acquisition vehicles—that raised billions of dollars as a quick and suddenly popular way to get more companies into the public markets’ wide-open arms.
The banks’ fourth-quarter results provide fresh evidence of the equity-underwriting hot streak, raising hopes that SPACs may continue to boost the banks’ results even as the overall economy shows signs of slowing down.
A SPAC is a public entity with no business that raises investor funds through an initial public offering. That so-called blank-check company seeks a merger, allowing its new partner to go public without the delays and demands of a traditional IPO. They were a quiet corner of Wall Street for years but surged in popularity in 2020. SPACs raised $82 billion in the U.S. last year, greater than all of the money previously raised, according to Dealogic.
