Are Spacs just for suckers?
This year has seen a big boom in activity by special purpose acquisition companies (Spacs) in the US and the Spac craze is spreading to other markets. But some people have their doubts about them.

The special purpose acquisition company (Spac) boom is going global. Spacs are shell firms that list on the stockmarket in order to raise cash. They then use the money to buy an existing company. Spacs provide the acquired firm with a route to a stockmarket listing that is less bureaucratic than the traditional initial public offering (IPO).
This year has seen a big boom in Spac activity in the US. Now other exchanges want a slice of the action. Singapore has become the first big Asian exchange to allow Spacs. There have been just three IPOs in the city so far this year. Singapore hopes that the new rules will help attract big tech listings.
London is late to the Spac party
London is also jumping in. British rules requiring Spacs to suspend their listings after announcing acquisition plans had encouraged the vehicles to list elsewhere.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But last month the Financial Conduct Authority (FCA), the City regulator, revised its rulebook to make “the fusty stock exchange more hospitable to these whizzy” vehicles, says Jim Armitage in The Evening Standard. The City has watched glumly as British businesses rush to do Spacs in New York, while Amsterdam blossoms as Europe’s Spac hub. “Stories like that make a patriotic government nervous.” Spacs in Amsterdam have raised about $3bn this year, compared with London’s “minuscule $6m”, says The Economist. The FCA reforms are welcome, but they are unlikely to be a game-changer.
British rules governing sponsors – the people who initiate a Spac – are still stricter than those in Amsterdam. Spacs planning to buy European firms will still prefer to raise capital in euros rather than in sterling to avoid currency risk. In any case, the Spac boom looks to be “petering out”.
In America regulators are turning against Spacs, says Michelle Celarier in New York magazine. They are accused of delivering “huge windfalls to their sponsors and early hedge-fund investors while burning individual investors”. Companies have been known to slash bullish revenue forecasts after deals are signed. Spac stocks in America have fallen by more than a fifth since the peak of the frenzy in February.
At their best Spacs can give ordinary investors access to exciting startups that were previously unavailable to them, says Kate Kelly in The New York Times. Yet they increasingly attract a “malodorous whiff”. The founder of electric truck company Nikola, which listed via a Spac last year, “was recently charged with securities fraud”. As Tyler Gellasch of nonprofit Healthy Markets puts it, “The only reason why someone would do a Spac is because they found a sucker”.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Reeves warned against property tax shake-up – 3 ways it could backfire on first-time buyers
Rachel Reeves reportedly has her eye on high-end property taxes in the upcoming Budget, but there are concerns a shake-up could unintentionally hamper those trying to get on the housing ladder
-
Average Brits want to retire five years before they can – who has the widest retirement gap?
Brits are expecting to work for longer than ever but there are big disparities in the number of extra working years predicted. A small tweak could help close the gap
-
Pierre-Édouard Stérin wants to make France great again
Conservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Global investors have overlooked the top innovators in emerging markets
Opinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Pinewood Technologies: a drive for growth
Pinewood Technologies’ platform is one of the best in the business. Investors should buy in
-
'EV maker Faraday Future will crash'
Faraday Future Intelligent Electric is failing dismally to live up to its name, says Matthew Partridge
-
Investors should cheer the coming nuclear summer
The US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
8 of the best houses for sale with follies
The best houses for sale with follies in the grounds – from a five-storey Victorian Gothic tower in Tonbridge, Kent, to a former mill in Oxfordshire with gardens that include a folly on an island in a lake
-
A tale of two Reits – why performance matters for valuation
AEW UK and Regional are two Reits that are valued very differently, despite a shared focus on properties outside London
-
Healthcare stocks look cheap, but tread carefully
Shares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?