SPACs Flame Out in SPACtacular Fashion. Was It Inevitable?

This article from ABI Journal was first published December 1, 2023. The entire publication is available at: https://www.abi.org/abi-journal/spacs-flame-out-in-spactacular-fashion-was-it-inevitable.

In the last few years, Special Purpose Acquisition Companies (SPACs) went from being an innovative pathway for companies to go public to a downtrodden asset class. Many factors led to the selloff of SPAC stocks overall, including the public markets’ softened acceptance of “story stocks” and the sharp increase in yield on short-term cash and near-term cash. What began as a way for companies to utilize pre-committee capital combined with a public listing, while holding out the prospect for additional capital through follow-on offerings, did not materialize for most SPAC stocks. While this is partially due to the SPAC structure, it is also likely a reflection of the industries over-targeted by SPACs, whose public-and private-market valuations experienced high volatility during the two-year period following peak SPAC activity.

In this American Bankruptcy Institute (ABI) Journal article, Stuart Gleichenhaus and John Yozzo examine the chain of events that led to SPACs’ fall from grace. The article looks at the failure of most de-SPAC reverse mergers to meet lofty pre-deal projections and expected market returns, and discusses some reasons for these disappointing outcomes.

Reprinted with permission from the ABI Journal, Vol. XLII, No. 12, December 2023.