The ignominious winding-up of the biggest ever blank-cheque company might seem to sound the death knell for these once-popular shell companies.
Bill Ackman’s Pershing Square Tontine Holdings (PSTH) was far from the first or the last, with hundreds of special purpose acquisition companies (SPACs) still listed on both sides of the Atlantic.
Many on this list are still looking for deals.
Even before the recent rout of tech and growth companies, the performance of post-SPAC companies had been far from impressive on the whole, with data from Renaissance Capital indicating over 90% of the companies that merged with a 2020-era SPAC have sunk below their IPO prices and the De-SPAC exchange-traded fund is down almost three-quarters over the past 12 months.
Understandably this has removed a lot of the gloss (Cazoo anyone?), as did the Securities and Exchange Commission starting investigations into the space and rolling out new rules.
US-listed SPACs have 24 months to get a deal done, which Ackman’s PSTH failed to do in time, hence the announcement overnight that it was returning cash to investors.
That two-year deadline is looming large for the many SPACs that followed hot on the PSTH’s heels, with many of the 77 SPACs that floated in the third quarter of 2020 are yet to tie up deals, as with the 132 SPACs that floated in Q4 2020 and the eye-popping 298 SPACs that raised a total of nearly US$88bn in the first quarter of 2021.
A large chunk of this 'wall of money' may be returned to investors in the coming year, with even some agreed 'de-SPAC' mergers having been cancelled recently.
Demise of deSPAC?
Deals have been abandoned in various sectors in recent months.
Digital trading star eToro last week called off its US$10bn IPO agreement with a SPAC called FinTech V, while earlier in the year crypto platforms Circle and Bullish Global said they were postponing their deals.
Business media powerhouse Forbes had agreed to list via a US$630mln merger with a SPAC called Magnum Opus Acquisition but last month said the deal was not going ahead.
Sandwich chain Panera Bread last week binned off its deal with USHG Acquisition, the SPAC led by New York restaurateur Danny Meyer, with the pair blaming market conditions.
In the biotech sector Blade Therapeutics and a SPAC called SPRIM Global Investments called off their deal last month, with Amicus Therapeutics being another cancelled SPAC biotech deal.
It’s rare that there’s no exceptions to a rule, and there have been some new SPAC deals announced in recent weeks, including Orchestra BioMed and Nasdaq-listed Health Sciences Acquisitions Corporation 2.
UK SPAC industry
Financials Acquisition Corp (LSE:FINS) raised £150mln in April 2022 to find deals in the ‘insurtech’ sector.
Hambro Perks Acquisition Company (HPAC), which floated last November, was the first SPAC to float in London after the London Stock Exchange changed the rules last August.
London SPACs have 15 months to find and arrange a reverse takeover deal, subject to three-month extensions with approval from shareholders.
The new rules removed some of the scepticism in the City that has lingered following a number of disastrous shell floats and previous rule changes in 2015 that included a lack of shareholder approval, the pre-deal suspension and lack of regulatory engagement.
New SPACs are still floating too, with two in the US and Spiritus Mundi PLC (LSE:SPMU) listing in London only last week, saying its Singapore-based management team is seeking acquisition targets in Europe and Asia in the clinical diagnostics sector.
However, unsurprisingly given the market backdrop, it could only attain a valuation of £2.5mln, which seems to speak volumes about where the SPAC market presently sits.