The SPAC bubble burst last year, resulting in hedge funds holding $170.5 billion worth of special purpose acquisition companies — more than double what they owned at the end of 2020, reports Institutional Investor.
Hedge funds, nicknamed the “SPAC Mafia” because they are the dominant buyer of SPAC IPO shares and warrants, owned only $82.4 billion at the end of 2020, according to SPAC Research.
The current glut of SPACs is, in part, due to the difficulty these blank-check companies have had in hooking up with merger partners. Almost 800 SPACs filed for IPOs last year, raising $162.5 billion — more than half of the $300 billion raised since the financial crisis of 2008.
But last year only 71 merger deals were announced, and just 53 completed. As the mania subsided, retail investors fled and SPACs fell back to their IPO price of $10 — or slightly below that — per share, prompting more hedge fund arb players to move into the market. Read more.
