Analysis: SPACs Splash the Cash to Salvage Deals

Flying money

SPACs are turning to costly new tactics to keep investors from jumping ship as market confidence wanes in the once red-hot alternative to IPOs, Reuters reports.

Blank-check acquisition firms and the companies they acquire are having to hand over bigger stakes in the ventures to investors in some cases, often at big discounts. Deal managers are also seeking backstop financing from investment firms and plowing in more of their own cash.

Less than three months into 2022, 13 mergers involving special purpose acquisition companies have already fallen through in the United States, according to data from industry tracker SPAC Research. That compares with a total of 18 in the whole of 2021.

In money terms, almost $9.5 billion worth of mergers have been canned this year, according to Dealogic data. Read more.

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Cashing Blank Checks – Why the Bold Favor SPACs: Analysis

Confident financial projections are common in SPAC deals and have been a decisive factor in attracting firms regarded as more risky, often loss-making and years away from even having any sales, over IPOs as a route to going public, Reuters reports, citing industry insiders and the news organization's review of data compiled by Jay Ritter, a professor at the University of Florida.