Fenwick corporate partner Mark Stevens spoke to The Wall Street Journal about the surge of SPAC initial public offerings in 2020 and their rising popularity among venture investors who increasingly see them as a viable alternative for their companies to go public, sometimes earlier and easier than would be possible in a traditional IPO.
Some venture firms are even forming their own SPACs, leading to concerns of a possible conflict of interest if firms steer their portfolio companies to their SPAC.
However, Stevens notes that there are ways to avoid a conflict of interest, such as by having independent board members on both sides of the transaction.
“Venture firms often seek to merge their portfolio startups together, and the venture firms that hold large stakes in both companies typically recuse themselves, leaving the decisive vote to merge the companies to other shareholders,” he told The Wall Street Journal.
The full article is available on The Wall Street Journal (subscription required).