Investors who bought into a SPAC that took a healthcare-services company public last year in an $11 billion deal have suffered steep losses, reports Private Equity News. But promoters of the SPAC still stand to make millions.
The paper gains for insiders, even as shares of MultiPlan fall, result from the unique incentives given to SPAC sponsors.
They are allowed to buy 20 percent of the company at a deep discount, a stake that is then transferred into the firm the SPAC takes public. Those extremely cheap shares let the creators make, on average, several times their initial investment. They also let the SPAC backers make money even if the company they take public struggles and later investors lose money. Read more.
