The blank-check frenzy that raised more than $245 billion over a two-year stretch has dried up, with just a handful of sponsors pooling investor money in 2023.
(Bloomberg) — The blank-check frenzy that raised more than $245 billion over a two-year stretch has dried up, with just a handful of sponsors pooling investor money in 2023.
“The SPAC party is over,” says Greg Martin, co-founder of Rainmaker Securities, which facilitates secondary transactions for private companies.
He has a point. Just seven special-purpose acquisition companies have debuted or filed for an initial public offering to start the year. That compares with more than 50 over the same stretch last year and roughly 337 in 2021, when SPAC mania was at its peak.
It’s a sharp fall from grace for blank checks, which saw a record 142 sponsors call it quits and close up shop last year, while 57 had deals collapse as markets spiraled, according to data from SPAC Research. So far this year, just five SPACs have raised $436 million, compared with $27 billion at this point in 2021, while two have filed plans to raise as much as $230 million combined.
After a historic stretch in 2020 and 2021, where politicians, celebrities and Wall Street titans were all rushing to form SPACs — sometimes four at a time — the vehicle is likely to return to the market’s fringes, according to those who track the industry.
‘Niche Situation’
“None of this is surprising,” Martin said in a phone interview. “The SPAC was always a tiny, niche situation for unique companies that weren’t ready for a traditional IPO.”
Going forward, the vehicle will likely be used to take public smaller companies that “have slipped through the cracks,” but it won’t come close to the numbers seen at the height of the pandemic, according to Martin.
All five SPACs that debuted this year raised less than $150 million each, a far cry from the $360 million average at the height of the boom. The two new filings for SPAC IPOs in February seek to raise $100 million and $130 million, respectively. There were no filings in January, the first month without a new SPAC IPO filing since April 2020, according to data compiled by Bloomberg.
As for the companies that have gone public through SPAC tie-ups this year, it has been a rough start. The median de-SPAC is down more than 60% from its debut despite many of the riskiest corners of the market soaring to start the year. Cathie Wood’s ARK Innovation ETF is up 39%, and a basket of meme stocks — a group detached from fundamentals — is 16% higher, while Bitcoin is rallying 37%.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.