SPAC
SPACs face liquidation as deal deadlines loom
February 23, 2023
Two years after SPAC listings hit an all-time high, many blank-check companies that launched during that peak are now facing a make-or-break year.
SPACs were one of the hottest market trends in 2020 and 2021, but investors' enthusiasm for these listings slumped last year amid the downturn in the public markets.
Under SEC rules, blank-check companies usually have just two years to merge with a target company after listing, although it can be extended to three. If the deadline is missed, the rules require the SPAC to be liquidated.
Many deadlines are coming up this year for those that listed in 2021, but with volatility persisting in the public markets, acquisitions will be harder to come by.
A total of 791 blank-check companies listed in 2021, according to PitchBook data, but since the beginning of that year, there have only been 467 acquisitions. What's more, the majority of those acquisitions were completed in 2021 itself, meaning some of them were targets of previous SPAC cohorts.
Hundreds of blank-check companies are currently in the market for a merger so competition will be fierce for quality targets, which may not even want to brave the public arena. Rising interest rates, inflation and geopolitical concerns still persist in 2023, making listings a less attractive choice than staying private.
Additionally, SPACs that have managed a business combination have been hit hard by the downturn, which could act as another deterrent for potential targets. PitchBook's DeSPAC Index—which tracks the public performance of deSPAC combinations after the mergers have been completed—is down 78.4% since March 2021.
SPAC liquidations have already been on the rise in the last few months. From December to the end of January, 100 have shut down, according to SPAC Research. Examples include Bob Diamond's Concord Acquisition Corp., which announced in December that it was liquidating after failing to close its $9 billion deal with cryptocurrency operator Circle. Earlier in the year, "SPAC King" Chamath Palihapitiya shuttered two of his blank-check companies after failing to find deals.
The picture is looking less than rosy for SPACs in the market, and many will have to return capital to their investors, who not only will have missed out on potential profits but will have also lost money on operating costs.
But while certainly more challenging, some have not yet given up on blank-check companies just yet. In January, it was reported that Hambro Perks Acquisition is in talks to merge with drug developer Istesso, while healthtech company Allurion agreed to merge with Compute Health Acquisition Corp. earlier this month.
Featured image by Supamotionstock.com/Shutterstock
SPACs were one of the hottest market trends in 2020 and 2021, but investors' enthusiasm for these listings slumped last year amid the downturn in the public markets.
Under SEC rules, blank-check companies usually have just two years to merge with a target company after listing, although it can be extended to three. If the deadline is missed, the rules require the SPAC to be liquidated.
Many deadlines are coming up this year for those that listed in 2021, but with volatility persisting in the public markets, acquisitions will be harder to come by.
A total of 791 blank-check companies listed in 2021, according to PitchBook data, but since the beginning of that year, there have only been 467 acquisitions. What's more, the majority of those acquisitions were completed in 2021 itself, meaning some of them were targets of previous SPAC cohorts.
Hundreds of blank-check companies are currently in the market for a merger so competition will be fierce for quality targets, which may not even want to brave the public arena. Rising interest rates, inflation and geopolitical concerns still persist in 2023, making listings a less attractive choice than staying private.
Additionally, SPACs that have managed a business combination have been hit hard by the downturn, which could act as another deterrent for potential targets. PitchBook's DeSPAC Index—which tracks the public performance of deSPAC combinations after the mergers have been completed—is down 78.4% since March 2021.
SPAC liquidations have already been on the rise in the last few months. From December to the end of January, 100 have shut down, according to SPAC Research. Examples include Bob Diamond's Concord Acquisition Corp., which announced in December that it was liquidating after failing to close its $9 billion deal with cryptocurrency operator Circle. Earlier in the year, "SPAC King" Chamath Palihapitiya shuttered two of his blank-check companies after failing to find deals.
The picture is looking less than rosy for SPACs in the market, and many will have to return capital to their investors, who not only will have missed out on potential profits but will have also lost money on operating costs.
But while certainly more challenging, some have not yet given up on blank-check companies just yet. In January, it was reported that Hambro Perks Acquisition is in talks to merge with drug developer Istesso, while healthtech company Allurion agreed to merge with Compute Health Acquisition Corp. earlier this month.
Featured image by Supamotionstock.com/Shutterstock
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