The SPAC Slowdown

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: the SPAC craze slows down, Hwang's ...

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Image BY DANIEL TENREIRO
& ANDREW STUTTAFORD
Image April 02, 2021
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BY DANIEL TENREIRO
& ANDREW STUTTAFORD
April 02, 2021
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The SPAC Slowdown

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: the SPAC craze slows down, Hwang's leveraged blowout, and S&P 4,000. To sign up for the Capital Note, follow this link.

Are SPACs Whack?
The boom in special-purpose acquisition companies (SPACs) has driven global deal activity to its highest level since 1980. Each blank-check company begins with an equity offering and ends with a merger, all in the span of less than two years — great news for the investment bankers collecting fees on the transactions. With 103 SPACs issued last year executing the "reverse mergers" by which they take companies public, M&A activity is up nearly 100 percent since last year. The velocity of SPAC deals is so high that banks are reportedly turning the lucrative deals down:

The pipeline of SPACs rushing to market is getting so clogged that bankers, lawyers and auditors are turning away business as they struggle to keep pace, according to people familiar with the matter. As founders of blank-check companies wait in line, the deep-pocketed investors needed to take them public have grown squeamish.

Some banks, such as Citi and Moelis, are compensating their overworked junior employees with cash bonuses, but analysts appear slated to have a lighter workload this summer as the SPAC craze slows down. In the past two weeks alone, four blank-check deals have been halted, with SPAC shares declining significantly from their highs early this year. The slowdown follows an influx of short-sellers into the ...   READ MORE

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