JPMorgan’s SPAC business has been dwarfed by rivals. And that could be a good thing.

• JPMorgan is an investment-banking powerhouse, but its SPAC business is well behind peer firms.
• The bank did 32 SPAC IPOs in the first half of 2021, ranking in ninth place.
• “It doesn’t necessarily pay to be first,” one research analyst said.

One of Wall Street’s top banks hasn’t been going all-in on special purpose acquisition companies.

JPMorgan typically tops the league tables in investment-banking revenue and debt capital markets, and it’s toward the top in equity capital markets, global mergers and acquisitions, and initial public offerings.

There have already been more blank-check IPOs this year than in all of 2020, and SPAC debuts can also lead to more business for bankers down the line as the vehicles look for companies to buy and take public.

JPMorgan worked on 30 US SPAC IPOs in the first half of 2021, worth $5.3 billion in proceeds, data from Dealogic indicated. That’s out of 347 IPOs total in the US, with proceeds of $113.5 billion.

That count already exceeds the bank’s total for all of 2020, when it did 17 SPAC IPOs, but it puts the bank at only ninth place in Dealogic’s league tables. Citigroup was No. 1 with 81 deals worth $16.7 billion. Cantor Fitzgerald, Morgan Stanley, Jefferies, Deutsche Bank, and Barclays were also ahead of JPMorgan.

JPMorgan in February put two top dealmakers in Europe, the Middle East, and Africa in charge of a growing “SPAC-specialist team” to nab more clients in that region. But bank researchers said in a late-April note that the SPAC boom had peaked. And executives didn’t mention SPACs during July’s second-quarter earnings call.

“They’re just a little bit more deliberate and conservative with how they approach their business and new business opportunities,” said Jim Mitchell, an analyst at Seaport Global. “I think JPMorgan knows that SPACs are here to stay, but they like to vet things a little longer and be more careful than their peers.”

Mitchell added that as SPACs come under increased scrutiny, JPMorgan’s approach may prove to be more sustainable.

“Given a wide variety of structures and uncertainty with risks, it makes sense to be conservative around them,” he said.

“The firm is methodical going after business, so in a few years, assuming SPACs remain relevant, I think you’ll see them moving up as this becomes more institutionalized,” Mitchell added.

SPAC debuts that JPMorgan worked on this year include the $345 million March IPO of Freedom Acquisition, which was founded by Tidjane Thiam, a former CEO of Credit Suisse, as well as Abhishek Bhatia and Adam Gishen. Freedom Acquisition is also in deal talks with the Mexican fintech group Credijusto and the Latin American corporate-data provider CIAL Dun & Bradstreet, the Financial Times reported.

Also in March, JPMorgan handled Isos Acquisition’s $285 million IPO, which was led by former WWE copresidents George Barrios and Michelle Wilson.

A representative for JPMorgan declined to comment to Insider for this story.

SPAC IPOs are starting to cool

SPACs raise capital and go public without revenue or operating assets. Then they typically have two years to deploy that capital and buy a private company.

SPACs had exploded in popularity thanks to investor demand to get in early on companies promising big growth and a more streamlined process than a typical IPO.

But the SPAC frenzy has cooled in recent months, and the Securities and Exchange Commission may be looking to rein in growth projections that listed SPACs make. The SEC has also reached out to top underwriters directly to learn more about their SPAC dealings, Reuters reported.

Last month, the SEC charged a space-transportation SPAC over misleading disclosures it — as well as its sponsor, merger target, and CEOs — made.

There were 62 SPAC IPOs raising $12 billion in the second quarter, down 80% from the record-setting first quarter but more in line with historical issuances, PwC found. Thirty-two SPAC mergers were completed in Q2, the majority in the information-technology sector.

Ken Usdin, an analyst at Jefferies, said that although JPMorgan may be a little more selective when it comes to SPACs, the bank’s overall equity-capital-markets business was flat in the second quarter while peer firms reported an average decline of 25%.

“Even though they’re not at the top of the SPAC league table specifically, their ECM business remains resilient despite their market-share position,” Usdin said.

JPMorgan so far this year has done 450 global ECM deals worth $65 billion, Dealogic and The Wall Street Journal reported, trailing Goldman and Morgan Stanley. But the bank has worked on some of the largest deals so far this year, including underwriting Coupang’s $4.5 billion IPO and acting as a joint bookrunner on the $4.4 billion DiDi IPO, although a collapse of the latter deal led to the SEC temporarily halting approvals for new Chinese IPOs.

Usdin added that, historically, JPMorgan hasn’t topped every single chart — but it doesn’t need to.

“While they’re trying to be the best of class — and have proven to be so over the course of time — they won’t be at the top of some of the most challenging products,” he said. “It doesn’t necessarily pay to be first.”

Mitchell said that when any new business opportunity explodes onto the market, there are always going to be a few firms that embrace it and put resources behind it while their peers remain unsure. The ones that jump in first dominate while others take a back seat until they become more comfortable with the processes and structures.

“It’s just first-mover advantage,” Mitchell said.