April 3, 2021
SPACs have so dominated Wall Street thinking this year that they are now the stuff of memes and ironic t-shirts.
Thanks to their burst in popularity with celebrity and retail investors alike, more than half of companies that went public last year happened through a SPAC. But the promise of these unconventional investment vehicles—of bigger, more efficient returns on a shorter timeline than traditional IPOs—may be starting to fall short.
Also termed blank-check companies, SPACs are shell companies that take private firms public by raising money on an exchange and then merging with or acquiring them to take their place on the exchange. It’s a back door for private firms to go public without bothering with the tedious IPO or direct listing process. Recent data on the trajectory of SPAC acquisitions show a strong run-up in the number and size of those deals last year, followed by a steep one-month drop-off in March. The number of deals fell more than 50% between February and March, while the value of those deals fell by more than 30%, according to data from financial market data firm Refinitiv.