Faster: the finance markets have been extremely tenuous the past 4 years between pandemics, supply chain crisis, world wars, inflation, and so on. An IPO requires 12 to 18 months of work / process before listing. SPACs can be done in a quarter or 2. In uncertain times it is much less risky to get the listing done fast.
Cheaper: Startups pay much less in fees to investment bankers when going through SPACs, there is also less dilution for investors and employees and more valuation transparency. In traditional IPOs investment bank underwriters have some conflict of interest to get lower valuations to pass the 'pump' onto their high value clients or proprietary trading desk. Why should they benefit over the people who have literally built the company?
While it is true that there is room to better regulate SPACs, there haven't been horrible abuses yet. It is also true that SPACs have not had the best returns for retail investors over the past few years however drawing a conclusion that this is due to SPAC usage versus the complex macro economic environment of recent years is very difficult.
Instead we saw popular podcasts push their SPACs on gullible retail investors, based on fuzzy concepts like disruption and TAM. Subsequently these SPACs lost 90% of their value and the insiders made bank. I hope to see jail sentences for the more shameless SPAC pump and dump players.
If people want to gamble, then that is their problem.
> It's faster and cheaper, those are things that are generally considered valuable.
For the company. It's also faster and cheaper for the company to just to ignore all regulatory requirements (financial reporting, product safety, pollution, labor, etc.), but that's usually illegal for good reason.
It's seems pretty dysfunctional that companies would be allowed to do an end-run around pre-IPO scrutiny like this.
[edit]
Some googling[1] implies my memory was mostly correct.
1: https://www.investopedia.com/roth-ira-conversion-rules-47704... See particularly the part about "backdoor
1. Take N dollars of post-tax money.
2. Put it in a Roth IRA.
But the same limits don't apply to this process:
1. Take N dollars of post-tax money.
2. Put it in a traditional IRA.
3. The next day, convert the traditional IRA to a Roth IRA.
When you do the conversion, you only owe taxes on any additional earnings (not your post-tax contribution) during the one day that it was a traditional IRA. So the second procedure accomplishes almost exactly the same thing as the first one, but it legally gets around the limit designed to prevent rich people from getting Roth IRA tax breaks.
However the companies that go public via SPAC are mostly VC-funded, so in that sense you’re right that they’re also profiting from the SPAC con by being able to dump their holdings in these companies that were not actually ready to go public.
