- FTI Technology’s Steve McNew is a senior managing director who specializes in investigations
- So far in 2021, there have been more than 300 SPAC IPOs, greatly surpassing the previous year’s record of 248 for the full year
- For SPAC investors, bitcoin companies represent a fresh and potentially intriguing possibility
Speculative purpose acquisition firms (SPACs) and cryptocurrencies are two of the market’s biggest developments today, according to investors. Financial commentators have predicted a potential watershed moment for the crypto industry following Coinbase’s IPO in April. At the same time, moreover, 300 SPAC IPOs have been announced so far in 2021, considerably surpassing the previous year’s record of 248 for the full year. When these two tendencies are combined, it creates an intriguing opportunity for investors to invest in a hot emerging market.
Many mining and crypto trading companies are planning to roll out their IPO
eToro, Bakkt, and CompoSecure are just a few of the high-profile cryptocurrency trading and mining companies that have already or are planning to IPO via SPACs this year. SPAC IPOs are often faster, simpler, and less expensive than traditional IPOs, making them a desirable alternative for bitcoin startups. Many in the industry have learned valuable lessons from Coinbase’s protracted IPO process, which lasted more than six months.
Similarly, bitcoin companies are a novel and potentially intriguing investment option for SPACs. Beyond what you’ve already seen in the market, with Coinbase establishing itself as a major player in the technology and financial spheres, and transaction providers like PayPal investing in cryptocurrency acquisitions, some traditional banks are now responding to consumer demand for banking products and services that include cryptocurrency. For many traditional financial institutions, this is posing a buy vs. build problem.
Investors are often unsure about how to evaluate a crypto company, comprehend its business strategy on a technical level, and check the digital assets it claims to maintain under custody because cryptocurrency is new and remains mainly an enigma to many. Investors may be unclear of which questions to ask or where to look for the proper answers as part of their due diligence and overall evaluation of the target firm. SPAC investors who aren’t familiar with cryptocurrency will want to know exactly what they’re getting, which will necessitate complex analysis in addition to conventional due diligence procedures.
Investors are finding new ways to analyze the Bitcoin assets
Experts have found dependable approaches for conducting these difficult technical analyses of bitcoin assets in recent months. The procedures are based on digital forensic investigation techniques and are frequently custom-built by investigators charged with gathering more information. Their purpose is to sample and confirm digital wallet and asset ownership, as well as custody asset ownership. The procedures also aim to verify the assets’ worth and legitimacy.
Another crucial point to notice is that rising SPAC activity has caused US regulators to take a closer look, with the Securities and Exchange Commission hinting (paywall) that additional limitations on SPACs are being considered. Investors and organizations involved in this field will need to exercise extreme prudence and diligence. They should also be aware of new audit and compliance requirements for SPACs and companies that have used them to go public.
A thorough evaluation before a transaction can uncover risks and avoid guessing, as well as support any post-investment remediation work required to maintain the target company’s long-term survival and compliance.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.