SPAC Craze Wanes as More Pull Plug Before Going Public

Many special purpose acquisition companies (SPACs), the darlings of Wall Street in 2021, have started the new year by pulling the plug on a public offering and withdrawing their registrations with the Security and Exchange Commission (SEC), Financial Times (FT) reported on Friday (Jan. 21).

The latest casualty is Ascendant Digital Acquisition Corp. II, which withdrew its registration statement on Thursday (Jan 19). It’s just one of seven blank check firms deciding to abandon initial public offerings (IPOs) since January began. Those firms cumulatively were looking to raise $2.5 billion.

On U.S. exchanges, SPACs raised about double the funds in 2021 — over $160 billion — compared to 2020, according to Bloomberg data. SPACs raised more funds last year than traditional IPOs for the first time.

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While close to 600 SPACs are looking for a merger target and roughly 250 are on deck planning to list shares, per Bloomberg data, the rise in cancellations just three weeks into the new year shows that investors’ appetites are waning.

The falloff could be due to a combination of poor performance, high-profile scandals and regulatory scrutiny, FT reported.

Registration withdrawals started in December 2021, with five SPACs abandoning plans to list compared to just three in the first 11 months of last year, according to Sentieo data, per FT.

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A senior banker told FT that there was a time when the SPAC market was so hot, some filed multiple simultaneously to save time and move on to the next opportunity. But now they have come to realize that “business combinations are hard to pull together.”

Riverside Management Group raised $1.1 billion through three SPAC IPOS between February 2019 and 2021. The third one never found a company to merge with. After completing its most recent IPO this year, Riverside then filed four simultaneously with the SEC — but then canceled three of the four. The largest was looking to raise $725 million.

Most SPACS have between 18 months and 24 months to complete a deal after listing. After listing, they must return all money to investors.

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SPAC shareholders are increasingly asking for their money back instead of funding mergers. This redemption rate topped 60% in December, according to data from SPAC Research, per Bloomberg. January is averaging close to a 90% redemption rate.