After the “epic” SPAC party, a hangover hit Wall Street

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Special Purpose Acquisition Company Update

Last month, when the Wall Street charity Robin Hood Foundation’s annual investor conference, the financiers behind the boom in the market in recent years gathered together, and the sense of reality began to suffer.

Robin Hood chose Jay-Z as the headline guest. His songs include Can’t knock the hustle and bustle. But in a conference group on so-called special-purpose procurement tools, some people seemed ready to admit that the game had changed.

For more than a year, Spacs has been crying. Refinitiv data shows that in the year ended in July, these blank check companies raised about $180 billion and became the driving force in two key areas of the market-initial public offerings and mergers and acquisitions.

But now the regulators are closing the market, leading to a sharp decline in trading activity, and a major transaction occurred this week. The funds raised by Spacs listed in the United States decreased from 35 billion U.S. dollars in March to 3 billion U.S. dollars in April, and the number of new cars dropped from 109 to 13.

As one of the most famous Spac bankers said in a private group event at the Robin Hood meeting, it was “an epic party and then an epic hangover.” This banker should know that he is Niron Stabinksy of Credit Suisse, who earned the nickname “Mr. Spark” for his longevity in the market.

Spacs raised funds from investors through a public listing and used the cash to find a private company and then went public, which has changed the IPO market. They provide companies in various fields such as the flying taxi company Joby Aviation and Richard Branson’s space tourism business Virgin Galactic with a quick way to enter the market. Jay-Z himself collaborated with a Spac called Subversive Capital Acquisition and agreed to list two cannabis companies.

Goldman Sachs estimates that there are still 400 American Spacs with US$118 billion in cash looking for deals.

But they are now facing a stricter regulatory environment from the new Washington administration. Gary Gensler, the new head of the US Securities and Exchange Commission, has made no secret of his desire to control the Spac frenzy and ensure that investors receive accurate disclosures.

SEC officials have warning Regarding the huge benefits of those who support Spac (called sponsors), Get a small skin in the game. They also have Suggest Investors should not invest in Spac just because of celebrity participation.

Perhaps the most effective measure of the SEC is A notice Many Spacs had to change their accounting treatment of warrants. This is a key feature that can reward early investors by buying cheap options on the stocks of the combined company. Regulators have stated that in some cases, warrants were misclassified as equity when they should be considered liabilities, thus hindering listing.

There were further signs of regulatory intent this week, hitting Spac backed by billionaire hedge fund manager Bill Ackman. The investor said that Wall Street regulators “turned on deaf ears” in the acquisition of a 10% stake in Universal Music through his Spac Pershing Square Tottine Holdings.

Ackerman said that the US Securities and Exchange Commission became the ultimate “trading killer” by communicating that transactions did not comply with the rules of the New York Stock Exchange. His Spac was listed on the New York Stock Exchange.

The problem is that Ackerman and his consultants came up with a complex structure to solve a key challenge facing his shell company-$4 billion. It has too much cash but too few goals to pursue. . After spending US$4 billion to acquire global shares, Ackerman’s hedge fund Pershing Square will supplement Spac’s cash, adding US$1.6 billion to find a company to go public. Investors can also choose to purchase another transaction through a newly created entity that does not require cash advance. After the US Securities and Exchange Commission took action, Ackerman cancelled the transaction.

Pershing Square will now acquire Universal’s 2 billion US dollars of shares, Universal can choose to buy the remaining half of the shares before September. People familiar with the transaction said it will obtain funding through a joint investment vehicle.

Elsewhere, securities regulators have recently brought back to reality the ambition of space transportation startup Momentus to become a public company.it Issue a fine In targeting the company and Stable Road Acquisition, Spac agreed to a deal that misled investors at a valuation of $1.2 billion.

The hyped electric car company, including competitors Nicholas and Lordstown Motor Company, Is also under investigation by the US Securities and Exchange Commission.Retail investors also seem to Tiring Space.

The subsequent slowdown was welcomed by critics. When the craze reaches its climax, it may even be a slight relief for the exhausted bankers and lawyers overwhelmed by the Spacs transaction.

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