There was an explosion of initial public offerings in the U.S. in the third quarter, with 165 companies going public between July 1 and Sept. 30, raising more than $61.5 billion—by far the most active quarter in 2020 and the most active Q3 in the past five years, according to our friends at Audit Analytics.
One of the reasons for this IPO-fueled quarter is that nearly half of them (48.5%) involved blank check companies, which Audit Analytics defines as “a company that has no established business plan or operations and can serve as a vessel to engage in a merger or acquisition with an unidentified company, entity, or other person.”
Startups can combine with a blank check company, which is also called a special-purpose acquisition company, to go public, in an alternative to a traditional IPO, according to the Wall Street Journal.
But SPACs have recently gotten the attention of J-Clay over at the SEC.
The WSJ reported on Sept. 24:
SEC Chairman Jay Clayton said Thursday that the regulator is examining how sponsors of blank-check companies disclose their ownership and how any compensation is tied to an acquisition. Investors buy shares in SPACs before the SPACs have done a deal, and they have the option to exit before a transaction is finalized.
So while the SEC tries to get its head out of its ass long enough to figure out what it should do about blank check company disclosures, let’s take a look at which audit firms had the most IPO clients for Q3.
According to Audit Analytics’ latest analysis of IPO market share, the Big 4 audited 70 IPOs, or 42.4%, of the IPO market—including traditional and blank check IPOs—in the third quarter. But Withum led with 53 IPO audit clients, which raised nearly $17.7 billion.
Here’s a chart from Audit Analytics that breaks down Q3 IPO client gains and proceeds:But if you take the 80 blank check IPOs out of the mix, those entitled auditors at EY took first place with 25, followed by KPMG with 17, PwC with 14, and Deloitte with 13.
Q3 2020 IPOs: Auditor Market Share and Stats [Audit Analytics]
Blank-Check Firms Offering IPO Alternative Are Under Regulatory Scrutiny [Wall Street Journal]