Wall Street Will Keep Gorging on SPAC Fees Long After Boom Fades

Wall Street will continue reaping rewards from its embrace of blank-check companies for a long time, even if the record-breaking boom in listings comes to an end.

Investment banks have earned as much as $15 billion from underwriting and advisory work with special purpose acquisition companies since the start of last year, according to research firm Coalition Greenwich. At least $8 billion of that revenue hasn’t been booked yet and will show up in banks’ results over the next two years, the data show.

One of the main reasons is that arrangers of blank-check IPOs in the U.S. get paid in chunks, with less than half of their typical 5.5% fee paid when a listing is completed. The rest is deferred until after the SPAC finds a target -- which can take up to 24 months -- and completes the merger.

That’s good news for top SPAC houses like Citigroup Inc., Goldman Sachs Group Inc. and Credit Suisse Group AG at a time when regulatory challenges are starting to send a chill through the market. Previous SPAC listings will provide “a very strong tailwind” to equity capital markets revenues through 2022, said Amit Goel, co-head of European banking research at Barclays Plc.

“It’s not game over for the banks,” said Nikolai Roussanov, a finance professor at the University of Pennsylvania’s Wharton School.

Blank-check companies completed $181 billion of U.S. listings over the last five quarters, accounting for 55% of all IPO fundraising in New York, according to data compiled by Bloomberg. At the peak of the frenzy, more than 50 SPACs unveiled plans to raise a combined $17 billion during a single week in February.