Investment banks have raked in billions of dollars by feeding the frenzy for blank-check companies, and they have done so largely without risking any of their own money on hundreds of deals that have left many investors with punishing losses, Reuters reports.
Banks sometimes take on dual roles as underwriter of a SPAC’s IPO, then as an adviser to a company being acquired by the same SPAC. Perfectly legal, so long as the relationships are disclosed.
Reuters analyzed hundreds of SPACs spanning roughly two years, reviewed banks’ internal documents and regulatory filings, and interviewed more than two dozen bankers, investors, SPAC managers, lawyers and corporate executives. The examination found that investment banks turbocharged to their benefit what turned out to be a speculative bubble in companies that have often failed to live up to their pre-listing hype. Read more.
