Sooner or later SPACs were going to face a painful realignment, Caixin Global writes. Once shining brighter than a white-hot star, these shells or blank-check companies, have rapidly dimmed, losing major wattage. Their basic premise — permitting access to early-stage, private companies, from which retail investors are normally excluded — is admirable and much-needed in a market that all too often favors institutional players.
But over the past two years, SPAC sponsors, target companies, consultants, auditors and lawyers, among others have been drawn into a swirling vortex that, at times, has degenerated into a free-for-all, amplifying echoes and drawing unfavorable comparisons of market exuberance from the South Sea bubble of the 18th century to the dot-com bubble of 2001.
On the whole, a SPAC’s lower cost and shorter timeframe to a public listing compared to traditional IPOs have won many admirers. Equally noteworthy, some acquisition targets could commandeer a higher price via a SPAC merger than through the private markets. But gale force winds — including a series of scandals, disappointing performance amid a tumbling stock market and heightened regulatory focus — have blown off the euphoric bubbly froth that has soaked the SPAC market during the past two years. Read more.
