Mideast’s Record SPAC Raises $260 Million to Buy Israeli Unicorn

(Bloomberg) -- An Israeli blank-check company will begin trading Friday on the New York Stock Exchange after raising about $260 million, making it the largest such deal in the Middle East and the region's first this year.

Investors behind ION Acquisition Corp 1 plan to buy an Israeli technology startup worth at least $1 billion, and see an opportunity to capitalize on a banner run for local offerings. The deal was multiple times oversubscribed and ended up bigger than an initially planned $200 million, said Gilad Shany, chief executive officer of ION Acquisition.

Israel's startups have traditionally sought to go public via initial public offerings -- prominent examples over the past year have included Lemonade Inc. and JFrog Ltd. But with low interest rates and market volatility helping fuel a frenzy, special purpose acquisition companies have raised more than $40 billion this year as an alternative.

SPACs Have Raised More in 2020 Than the Last 10 Years Combined

“It's become very costly, it's become very complicated and cumbersome for companies to go public,” Shany said. “We give them certainty, visibility, price visibility, which you don't get in a very volatile market.”

SPACs reverse the process of a typical IPO by raising money from investors first and trading publicly, then seeking to buy a company. They have had a bumper year as investors turn to equity markets for returns, and venture capital and private equity firms look for ways to take private companies public.

Shany is attracted by the strong performance of recent Israeli tech IPOs, and what he says is a roughly 10% to 30% discount that the country's firms face compared with their American peers. He's looking at startups in software-related businesses including areas such as fintech, e-commerce and cybersecurity.

Along with Shany, who is also manging partner for the ION Crossover Partners venture fund where he's invested in startups like Fiverr International Ltd. and Monday.com Ltd., the SPAC will be chaired by Jonathan Kolber. Cowen Inc. is underwriting the offering.

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