Investors grabbing shares in beaten-down companies after a merger with blank-check firms aren’t getting much of a bargain, Bloomberg reports. In most cases, they’re still paying dearly for promises of revenue and profits that remain years away.
The median price-to-sales ratio for companies that merged with SPACs since the start of 2020 sits at roughly 4.1, even after the sector has shed more than half of its value in the past year. And this counts only the ones with revenue to measure. Over half of the 286 target companies didn’t have any, according to data compiled by Bloomberg.
That’s far higher than the benchmark S&P 500 Index, home of the world’s blue-chip corporations, which trades at about 2.8 times sales. While investors routinely pay more for startups because they’re counting on exponential growth, the prospects for some of these nascent companies targeted by SPACs are so shaky that they’ve warned they might be forced out of business. Read more.
