Special-purpose acquisition companies, or SPACs, were one of the stock market’s hottest trends in early 2021, drawing in billionaires, celebrities and athletes.
Then, in early spring, enthusiasm began to wane, as “blank check” firms — which raise money from investors and then go hunting for takeover targets — started to receive greater scrutiny from lawmakers and regulators in Washington.
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“I have deep concerns about the lack of transparency and accountability that is a hallmark of the SPAC process,” Rep. Maxine Waters, the chair of the House Financial Services Committee, said at a hearing last month.
But SPACs could be coming back into vogue. Nine new SPACs raised $1.4 billion last week, according to Bill Smith of Renaissance Capital, making it the busiest week since March.
It’s clear there’s been a marked slowdown. So far this quarter, just 50 new SPACs have listed globally, raising $10.9 billion, according to Dealogic data provided to CNN Business. That’s compared to 304 listings that raised $98.4 billion between January and March.
Activity could pick back up, however, as investors continue to hunt for creative places to park their money. According to a Bank of America survey published Tuesday, 18% of global fund managers say they are taking higher-than-normal risks, up 4 percentage points compared to the previous month.
While there is still skepticism among some startups that merging with a SPAC is the best way to go public, there are firms willing to take this route instead of pursuing a traditional initial public offering.
On Monday, online grocery shop Boxed announced it was going public in an $887 million deal with a SPAC called Seven Oaks Acquisition Corp.
And last week, Vertical Aerospace, a UK electric aircraft manufacturer, said it would go public by merging with the New York SPAC Broadstone Acquisition Corp., while the banking app Dave said it would merge with a SPAC sponsored by the investment firm Victory Park Capital.
Hedge fund billionaire Bill Ackman’s SPAC is also said to be nearing a complex deal with Universal Music Group that would value the business at $40 billion.
The success of these arrangements may dictate whether other SPACs searching for companies to take public can do so with ease.
So far this quarter, there have been 63 SPAC merger announcements globally, with deal value topping $140.6 billion, according to Dealogic. That’s down from 100 SPAC deals worth $227 billion in the first three months of the year.
