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.
Subscribe to 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”.
-
Bitcoin hits new heights - is now a good time to invest?The value of Bitcoin has surged to a 20-month high. Why is Bitcoin rising and is now a good time to invest?
-
Gold hits record high - could it soar higher next year?
The yellow metal has hit a new all-time high. We look at market expectations for 2024, whether investors should sell and take profits, and how to invest in gold.
-
Crypto is “Monopoly money”
FTX won't be the last crypto scandal, because cryptocurrencies mirror the worst aspects of the finance industry.
-
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
-
Can Lidiane Jones be Bumble's perfect match?
Dating app Bumble is taking on Lidiane Jones, a well-regarded leader in tech, as its new boss. Can she work her magic in a new arena?
-
Are corporate bonds a good bet?
Corporate bonds pay a slightly higher yield than governments, but spreads aren’t generous by past standards.
-
SoftBank’s shares slump on quarterly loss
Japanese investment group SoftBank’s technology funds have struggled, not least because of an investment in WeWork.
-
M&S shares shift from frumpy to fabulous as pre-tax profits are up by 56%
M&S is performing strongly and has announced it will pay a dividend for the first time since the pandemic.
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
-
Three defence stocks set to flourish in an era of instability
A professional investor tells MoneyWeek where he’d put his money. Tom Bailey highlights three defence stocks that look promising.
