In Record-Breaking Year, SPACs Avoid Gender Diversity Push

(Bloomberg) -- In a record-breaking year with more than $70 billion raised, the opaque acquisition vehicles known as SPACs are avoiding something the rest of corporate America says it plans to do: boost gender diversity. And it shows, with about half of 151 special purpose acquisition companies reviewed by Bloomberg having no women on their board.

That lags companies with traditional initial public offerings in the past 12 months, only 24% of which don’t have women on their boards.

It’s even more stark when compared to the Russell 1000 index. While companies in the index boast an average board size about twice as large as their SPAC counterparts, less than 1% of members of the U.S. benchmark have no female directors.

The newfound popularity of SPACs -- which account for almost half of the total amount raised in U.S. IPOs this year -- is a setback in a decade-long drive to increase board diversity at public companies. The boards overseeing SPACs aren’t just mostly men; they are overwhelmingly men.

When tallying the board seats at blank-check companies, women held only 15.5% of the 671 total seats, the data show. That’s below the 19.8% of seats held by women out of 1,610 total board seats of recent traditional IPOs.

Bloomberg reviewed data on 151 SPACs that have raised money in IPOs from 2017 through November, and haven’t yet completed an acquisition.

While companies that list the traditional way often anticipate public scrutiny of their corporate governance -- including gender equality -- from investors and reporters, deals with blank-check companies are negotiated mostly in private. The target company in a blank-check merger has only the SPAC’s managers or sponsors to appease.

“Companies going through an IPO tend to think about diversity through the quarters and months before they reach the public market,” said Lise Buyer, managing partner of Class V Group, which helps startups prepare for their IPOs and get ready to become public companies.

SPACs, once an investment backwater, have entered the mainstream in 2020, partly in response to the uncertainty generated by the coronavirus pandemic. SPACs typically launch through an IPO at a fixed share price and then begin the hunt for a private company that wants to go public through a merger.

The more than $70 billion raised by SPACs on U.S. exchanges this year exceeds the combined total of all previous years, according to the data compiled by Bloomberg.

Rules Kick In

Three of the SPACs launched by prominent financier Alec Gores have no women on their boards, along with ones founded by tech investor Chamath Palihapitiya, who took Richard Branson’s space-tourism company Virgin Galactic Holdings Inc. public. Of the six SPACs that Palihapitiya has raised to date, just two of them have had female board directors. A new SPAC by Gores that is still pending lists two women on the board. Virgin Galactic has a woman on the board, too.

Nasdaq Inc. on Tuesday proposed rules that most companies listed on its U.S. exchange would have to include on their board at least one director who identifies as female and one who identifies as an underrepresented minority or LGBTQ. That requirement wouldn’t apply to SPACs when they first list, but would kick in once they complete a merger -- subject to a timeline that gives the companies several years to comply.

Certain states already have requirements for board diversity. That includes California, which requires that companies headquartered in the state have at least one woman on the board.

“Companies that are acquired by a SPAC have to think about it once they’re already public prior to the rules kicking in if they’re in California,” Buyer said. “For companies that aren’t, I don’t think they have those pressures on them at all.”

Boutique investment bank Perella Weinberg calculated in September that just one out of the 160 SPACs it looks at had a female chief executive officer.

Some have spotted that trend and have set up vehicles specifically to tackle gender equality.

‘Perfect Opportunity’

“Anytime someone is going public or de-SPAC-ing, it’s a perfect opportunity to have your board reflect the diversity goals that you have, assuming you have them and every organization should,” said Tanya Domier, the CEO of sales and marketing agency Advantage Solutions Inc., which went public in October through a merger with Conyers Park II Acquisition Co.

“Anytime you have a diverse senior management, you tend to see the benefit of diversity throughout the organization,” she said.

Perella Weinberg, which is itself in talks to go public via a SPAC listing, started its own blank-check company and appointed Stacia Schlosser Ryan, the bank’s co-head of consumer and retail as well as co-head of diversity and inclusion, as CEO. The SPAC will focus on finding businesses that are owned or led by women.

©2020 Bloomberg L.P.