Credit Suisse CEO Sees SPAC Boom Lasting Where Goldman Has Doubt

(Bloomberg) -- Goldman Sachs Group Inc. may be getting wary of the boom in blank check companies, but Credit Suisse Group AG says it’s ready to ride the wave.

The chief executive officers of two of the top IPO underwriters struck different tones at the end of a year marked by a surge in offerings of the special purpose acquisition vehicles, or SPACs.

Credit Suisse Group’s Thomas Gottstein, whose firm seized on the boom to climb to the top of the rankings and triple fourth-quarter stock underwriting fees, says SPACs are here to stay and demand is increasing in areas such as Asia. Goldman Sachs’s boss, David Solomon, has warned the market be a little too enamored and that there could be a pullback this year.

SPACs are empty corporate shells that raise money from investors and then aim to merge with a private business, essentially taking that company public through the back door. Such vehicles raised a record $39 billion during the fourth quarter, more than 10 times the same period in 2019, prompting former banking executives including ex-Credit Suisse CEO Tidjane Thiam to seize on the investor appetite.

“We continue to see big demand for SPACs in the U.S. but also increasingly in Asia,” Gottstein said on a conference call on Thursday. “In the short term we don’t see a slowdown, it provides an alternative to private equity and traditional IPOs.”

Credit Suisse was the No. 1 adviser on IPOs of such blank-check companies during the quarter with a 16.7% market share, ahead of Citigroup Inc.’s 9.5% share, the Bloomberg-compiled data show. Goldman ranked 6th among global SPAC advisers in the fourth quarter.

“There will be something that will in some way, shape or form bring the activity levels down over a period of time,” Solomon said on an earnings call for the Wall Street bank last month, without elaborating “Like many innovations there is a point in time as they start where they have a tendency maybe to go a little bit too far and they need to be pulled back or rebalanced in some way.”

Last year more than 200 blank check companies raised $80 billion from investors, according to data compiled by Bloomberg. That exceeded the combined total in all previous years and made up almost half of the year’s volume of initial public offerings, the data show.

While Credit Suisse is top ranked on blank-check IPOs, Goldman Sachs has focused on earning fees from SPACs when they find their targets. The Wall Street bank was the top adviser on mergers and acquisitions involving SPACs in the fourth quarter, with a 36.2% market share, according to data compiled by Bloomberg.

In the first six weeks of this year, activity has been even stronger compared to last year, Gottstein said, though he cautioned that the situation may yet change and the bank is being selective in which deals it will advise.

“It is here to stay, whether it is here to stay at these levels in the mid to long term, we will have to see.”

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