Wall Street firms helped raise billions since 2016 to fund special purpose acquisition companies, or SPACs, but investors would have been better off buying the S&P 500, according to a Bain & Co. analysis, Bloomberg reports. The majority of mergers done through blank-check firms from 2016 through 2020 underperformed the U.S. benchmark.
In its annual global private equity report, Bain focused only on SPACs that completed acquisitions. Of the 121 transactions it reviewed, 60% have lagged behind the S&P 500 since their mergers, and more than 40% of the stocks were trading below their $10 initial public offering price as of Jan. 25. Investors who bought an S&P 500 index fund at the end of 2015 more than doubled their money over the next five years.
The key to performance rests with the financiers who are raising the SPACs and whether they’re picking quality companies to take public, said Hugh MacArthur, head of Bain’s global private equity practice. Read more.
