07.12.2021 – 19:28
Stock exchanges newspaper
Things had recently become a little quieter around Spacs (Special Purpose Acquisition Companies). Since the beginning of the pandemic, the takeover vehicles, which initially started empty on the stock exchange, had served a good purpose for hedge funds, private equity houses and other institutional investors: They were able to park part of the excessive liquidity from loose monetary policy and government stimulus programs worth billions in Spacs.
If the announcement of a disapproved takeover came up, they could return the shares at the standard issue price of $ 10, without making a loss and without paying negative interest. In the current year alone, Spacs were able to collect more than 200 billion dollars. However, the hype broke off quite abruptly in April because many “pipe” investors (private investment in public equity), whose money is needed for the accompanying capital increases for the takeovers, turned away from Spacs.
In addition, the SEC applied increasingly stricter standards and treated Spacs in a similar way to stock exchange candidates in conventional IPOs: They had to account for the purchase options (warrants) associated with their shares as liabilities and were no longer allowed to make too wild predictions about sales and profit increases. The founders (sponsors) also earned well, as they usually receive 20% of the shares free of charge as compensation for their efforts. But more than half of the Spacs have since been quoted below the IPO price – and the wave of Spac IPOs subsided somewhat.
Now the vehicles have hit the headlines again because the former US President Donald Trump wants to merge his microblogging and streaming company Trump Media and Technology Group with the Spac Digital World Acquisition Corporation for a valuation of 9 billion dollars (!) – and because the SEC is now scrutinizing deals between the two companies that took place before the merger was announced in October. At the same time, the extremely highly valued electric vehicle manufacturers Lucid, Lordstown and Nikola, which were also listed on the stock exchange via the Spac merger, are being criticized by the authority. Sometimes it’s about exaggerated forecasts or numbers on customer pre-orders, sometimes about misleading investors. Overall, the market for Spacs is being trimmed by the regulators. That comes late, in some cases maybe too late for duped investors. But it is a welcome development.
Stock exchanges newspaper
Original content from: Börsen-Zeitung, transmitted by news aktuell