At an open meeting on March 30, 2022, the Securities and Exchange Commission proposed far-reaching changes to the regulations of special purpose acquisition companies, or SPACs, that could eliminate many of the advantages the vehicles have enjoyed over traditional IPOs.
Heading into the audit season for 2021 financial reports, expect independent public accountants to take a hard look at how many of the bumper crop of special purpose acquisition companies (SPACs) are likely to be still viable twelve months from now.
If you look at the headline numbers, SPACs appear awash with cash. In 2021 alone, 436 SPACs have raised $126 billion, for an average of $289 million apiece, according to SPAC Insider. Today, over 450 SPACs are scouring the universe for an enticing private company target into which to deposit their bag of money.
With 417 funded SPACs currently in search mode for the perfect private company to merge with, 2021 is becoming the “Year of the de-SPAC” following the “Year of the SPAC” in 2020 that carried over into the exuberance of the first quarter of 2021. These SPAC sponsor teams are sitting on about $140 billion of capital in trust, supplemented by tens of billions more in PIPE investments, which could theoretically generate a trillion dollars of market capitalization for newly formed public companies.
A High-Growth Debutante Ball of sorts is months away. Dateless SPACs (i.e., special purpose acquisition companies) would be wise to fix their gaze on the hot young Southeast Asian start-up market if they don’t want to be left without a dance partner.
Carson Block is the most famous short-seller of his generation, known for tome-length, densely researched short reports that eviscerate companies where he believes management is lying and taking shareholders to the cleaners. He is not afraid to use the f-word — “fraud” — in his reports. And as you will discover in this interview, his views on the market are laced with f-bombs and salty stories as well. So, trigger warning, folks: if you are squeamish about looking under the rock that is sometimes Wall Street, this interview may not be for you.
Chinese IPOs had a strong start in the first quarter of 2021, with 24 initial public offerings from Greater China that raised $5.8 billion. According to Renaissance Capital data, that's up by 728% over the $700 million raked in by Chinese names listing on NASDAQ and the New York Stock Exchange in the first quarter of 2020.
On March 31st, the SEC’s Acting Chief Accountant, Paul Munter, issued a lengthy “public statement” detailing concerns about private companies' readiness that go public through a SPAC merger to be successful as listed companies. His admonitions come as SPAC IPOs have exploded in the first quarter of 2021, with 298 SPACs raising over $87 billion, nearly 24 times the $3.49 billion raised by 13 SPACs during the comparable period in 2020. At the same time, SPAC IPOs that had been trading at huge premia to the cash held in trust and outperforming the S&P back in February have seen a significant retrenchment, with an average return of just 1.5% for SPACs that debuted in Q1 2021, according to Renaissance Capital.