Dozens of startups raised hundreds of millions to go public with a SPAC or IPO after taking government loans during the pandemic

SPAC popularity in real esate tech world 4x3
Samantha Lee/Insider

  • About 30 startups took government-backed pandemic loans before raising millions in a SPAC deal.
  • Another 16 startups went public with an IPO in the months after they received the loan.
  • IPOs and SPACs took off amid the pandemic, taking hundreds of companies public.
  • See more stories on Insider’s business page.

Dozens of startups took government-backed loans for small businesses during the pandemic and then went public, new data show.

The data, provided to Insider by PitchBook, showed about 30 startups went public with a special purpose acquisition company, better known as a SPAC, in the months after receiving a Paycheck Protection Program loan, a forgivable loan aimed at helping business owners harmed by the pandemic.

Another 16 companies, ranging in valuation from $187 million to $8.5 billion, joined the public markets with an initial public offering after they received the loan.

The Wall Street Journal, which first reported on the data, said the dichotomy of receiving a government-backed loan followed by raising millions with a SPAC or public offering has sparked debate as to whether the companies should pay back the PPP loans, even if they meet the qualifications for forgiveness.

Read more: A 29-year-old crypto billionaire who’s perfected digital-currency arbitrage shares 2 tips for investors looking to get started in trading – and explains why ether is unlikely to surpass bitcoin

Through interviews with executives and analysis of public documents, the Journal found a third of the 15 highest-valued startups that took a PPP loan ahead of a SPAC deal already repaid the money or have said they’ll do so.

The government doled out 5.2 million PPP loans, totaling $782.2 billion as of May. The businesses who got a loan can receive forgiveness if it was used for qualified expenses, like rent or worker pay.

Some companies were scrutinized for taking a PPP loan meant for small business-owners. Shake Shack, for example, received a $10 million loan and later paid it back after people criticized the company for receiving one as program funds dried up, leaving other businesses without any aid.

One CEO told the Journal the $3 million loan was an “invaluable tool” at the time the pandemic hit, and he was happy to repay it after raising $600 million in a SPAC deal. The executive, Scott Mercer, founded Volta Industries Inc., and merged with Tortoise Acquisition Corp II in a deal that valued the electric-vehicle-charging company at $2 billion, Reuters reported.

SPACs took off in a big way during the pandemic. The blank-check companies merge with private businesses and take them public, without the target having to go through an initial public offering. In 2020 alone, SPACs raised a record $73 billion, which was a 462% jump over the previous year.

So far this year, the number of SPAC deals has already beaten that record. But the SPAC boom may be slowing down, Insider reported previously. Regulators have been monitoring the SPAC craze, and in March, the Securities and Exchange Commission warned investors of the risk in SPACs not living up to the hype.

The IPO market also took off during the pandemic, with 430 new companies listing in 2020, which is the most since 2000, according to Dealogic.

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New York City home-buying has begun to rebound after a year of exodus during the COVID-19 pandemic

manhattan new york
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  • People are moving back to Manhattan and taking advantage of lower prices in the process.
  • Manhattan home-buying increased 2.1% in the first quarter this year from the same time last year.
  • Prices remain lower than before the pandemic, new data show.
  • See more stories on Insider’s business page.

People are buying up real estate in Manhattan once again after leaving en masse amid the COVID-19 pandemic that hit the city hard.

For the first time since the beginning of 2020, the number of sales topped the year-ago total, according to a report by Douglas Elliman Real Estate brokerage that was first covered by Bloomberg.

Apartment sales in the borough increased 2.1% in the first three months this year as compared to the same time last year when the pandemic struck the city, the report said.

The rebound in March alone was the strongest since 2007, as about 1,500 homes in Manhattan were under contract for sale, according to a report from The Wall Street Journal that cited real-estate analytics firm UrbanDigs.

Buyers are taking advantage of the lower prices, too, with most of those sales closing at or below the asking price. The median rate was $780,000, which was a 3.8% drop from the same quarter a year ago, the Douglas Elliman report said.

Read more: Brooklyn is winning the pandemic. Eager homebuyers are propelling a real-estate surge as Manhattan lags far behind.

The west and east side of Manhattan, as well as downtown, had the strongest sales compared with last year, as upper Manhattan and Midtown had fewer deals, the WSJ said.

Six months into the pandemic, real-estate experts had estimated lower prices and higher vacancies could be the new normal for the city, even if it wasn’t as drastic as during 2020.

With businesses allowing employees to work from home during the pandemic, many people were able to move to outer boroughs for more space and lower prices. Brooklyn proved resilient amid the pandemic, as its sales began bouncing back in the last three months of 2020.

Many others during the pandemic fled to the suburbs, and might stay as companies begin to offer long-term work-from-home options.

Read the original article on Business Insider