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

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Samantha Lee/Insider 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.

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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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