Nextdoor is the latest company seeking to go public through a merger with a special-purpose acquisition company (SPAC).
The neighborhood social network said the deal would give the business an equity value of around $4.3 billion.
Up front: Nextdoor announced its plan after usage surged during lockdowns. The app, which neighbors use to communicate with each other, reported a 50% annual growth in daily active users last year.
Instead of going public via a traditional IPO, the company has chosen to merge with a SPAC launched by VC firm Khosla Ventures.
Nextdoor will join the likes of Buzzfeed, Virgin Galactic, and Opendoor to go public by merging with SPACs. The deal is expected to be completed in the fourth quarter.
Background: SPACs became a hot investment trend on Wall Street last year. They are essentially shell companies that are used to take a company public, without needing all the paperwork of a traditional IPO.
After becoming a public company, the SPAC will usually merge with an existing private company and thereby take it public. As SPACs don’t have any business operations to describe, they don’t require the same level of disclosures as a regular IPO.
However, enthusiasm for SPACs has wained in recent months, due to disappointing share price performances and increasing regulatory scrutiny.
Quick take: Nextdoor‘s announcement shows there’s still an appetite for SPACs. The company’s share price performance will provide signals about the method’s benefits and risks.