Many special purpose acquisition companies (SPACs), darlings of Wall Street in 2021, started the new year by ending a public offering and withdrawing their registrations with the Security and Exchange Commission (SEC), reported the Financial Times (FT). Friday (January 21).
The latest victim is Ascendant Digital Acquisition Corp. II, which withdrew its registration statement on Thursday (January 19). It is just one of seven blank check companies that have decided to abandon initial public offerings (IPOs) since the start of January. These companies were looking to raise $2.5 billion.
On U.S. exchanges, SPACs raised roughly double the funds in 2021 — more than $160 billion — compared to 2020, according to Bloomberg data. SPACs raised more funds last year than traditional first-time IPOs.
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With nearly 600 SPACs seeking a merger target and about 250 planning to list stocks, according to Bloomberg data, the rise in cancellations just three weeks into the new year shows that the appetite of investors decreases.
The fall could be due to a combination of poor performance, high-profile scandals and regulatory scrutiny, FT reported.
Registration withdrawals began in December 2021, with five SPACs abandoning their intention to register, compared to just three in the first 11 months of last year, Sentieo data shows, per FT.
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A senior banker told FT that there was a time when the SPAC market was so hot that some were filing several at once to buy time and move on to the next opportunity. But now they realize that “corporate combinations are difficult to achieve”.
Riverside Management Group raised $1.1 billion through three SPAC IPOS between February 2019 and 2021. The third never found a company to merge with. After completing its last IPO this year, Riverside then filed four simultaneously with the SEC – but then canceled three of the four. The biggest was looking to raise $725 million.
Most SPACS have 18 to 24 months to complete a transaction after listing. After registration, they must return all the money to the investors.
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SPAC shareholders are increasingly asking for their money instead of funding mergers. That redemption rate topped 60% in December, according to data from SPAC Research, per Bloomberg. The month of January is on average close to a redemption rate of 90%.