Joshua Harris Says SPACs Are "Here To Stay"
Josh Harris, a notable private equity investor, said at a conference on Wednesday that the boom in special purpose acquisition companies was not just a passing fad. Apollo has both raised its own SPACs and exited its position in companies through the blank check vehicles, Harris said.
Earlier in September, Apollo filed for an IPO for its new SPAC, Apollo Strategic Growth Capital. (Raising $860 million). Apollo is not opposed to the traditional IPO process either, they took Rackspace public through that route in August.
"The SPAC part of the IPO market is a part of the market that's here to stay," Harris told CNBC's Leslie Picker.
SPACs go public through their own IPOs, then using their cash, do a reverse merger with a private firm. The publicly traded shares of the SPAC then become the shares of the formerly private company. Companies using SPACs have raised more than $30 billion so far this year. Harris estimated that SPACs now make up 20% of the market for going public.
"There's a real need for quick, confidential capital and price certainty and for sponsorship in the markets. And most of the SPACs that have been done have been more emerging growth SPACs, less cash flow more growth. And what we see is the opportunity for sponsorship," Harris said.
SPACs are filling a funding need for pre-IPO private companies that want certainty on price and fundraising while speeding up the process as well.
"We don't have a pocket for that right now. That just goes nowhere. So SPACs provide a real pocket for pre-IPO into IPO capital that we don't have otherwise, and we think we also could add value to the market," he said.
Harris said the one time when SPACs make more sense is when existing investors are looking for "more of a cash exit. A lot of times the IPO market doesn't want any monetization."