SPAC Mergers Fall Off in Early 2022

Mergers involving special purpose acquisition companies (SPACs), in which blank-check public companies merge with private ones wanting to go public, are beginning to fall apart, Bloomberg reported Monday (Feb. 14).

At least six mergers have been canceled thus far in 2022 — a record number for deals nixed in a single quarter. Among those were deals between Carlyle-backed Syniverse Technologies and M3-Brigade Acquisition II Corp., and between Acorns Grow and Pioneer Merger Corp.

According to Bloomberg, this could signal that tech-stock volatility is affecting big mergers, as well as investors wanting to cash in.

In addition, on Monday, Astrea Acquisition’s deal to take HotelPlanner and Reservations.com public, which had been going on since last August, also fell apart. Bloomberg wrote that there weren’t any details on this.

The report notes that SPACs with over $2.2 billion in trust have dropped mergers in the last six weeks, and have instead been looking at new targets. According to data from Chicago-based SPAC Research, which tracks the industry, at least 22 SPAC mergers have fallen apart since mid-2021.

Per the report, there’s uncertainty surrounding SPACs right now because of the impending hikes on interest rates, along with several SPACs that have been hunting for private companies to take public.

PYMNTS wrote recently that Securities and Exchange Commission Chair Gary Gensler has concerns about how SPACs need to be regulated.

See also: SEC’s Gensler Sees Need for Investor Protections in SPACs

The SEC has undertaken two SPAC enforcement actions, and Gensler thinks there’s room for apprehension over investor protection. That has seen policyholders and liability insurance underwriters holding their breath.

The agency issued a guidance last spring saying SPAC warrants should be classified as liabilities instead of equity instruments. That caused a decline in the number of SPACs.

According to Kevin LaCroix, executive vice president of RT ProExec, which distributes specialty insurance products and services, the SEC has been a “wild card,” and if it becomes more aggressive on SPACs, that could affect underwriters’ willingness to participate in the market.