It’s Crunch Time for the SPAC Boom’s First Listings

Mitch Nussbaum, co-chair of Loeb & Loeb’s Capital Markets & Corporate practice, is quoted in a Barron’s article discussing special purpose acquisition companies (SPACs) listed in 2020, which are running out of time to secure merger deals. A declining stock market, the war in Ukraine, rising inflation and fear of a recession have all led to a decrease in IPOs.  

According to the article, mergers for SPACs from 2020 are low; only 84, or 34%, of 248 SPACs listed have yet to close a merger, including 28 that are pending and 56 that have yet to announce a deal. Liquidations among SPACs from 2020 have also increased. 

Mitch told the publication that he expects more SPACs will liquidate due to the volume of blank-check companies that have gone public recently. He pointed to the 248 SPACs that listed their shares in 2020, a 76% increase from the 59 that went public the year before. Liquidations will “go up a corresponding amount,” Mitch predicted.

However, Mitch noted that he doesn’t expect more than 20% of SPACs to eventually liquidate, since blank-check companies can typically extend their merger deadlines until they find a suitable target. 

“SPAC liquidations aren’t necessarily a bad deal for shareholders because companies have to repay shareholders at the offering price, typically around $10 a share or higher, even if a shareholder bought the stock at a lower price. It’s OK if not everyone gets a deal done because the public receives a full return of their investment in that case,” he said.

Click here to read the full article on Barron’s website (subscription required).