The special purpose acquisition company (Spac) boom is cooling. Spacs are shell firms that list on the stockmarket in order to raise cash. They then use the money to merge with another company.
For start-up founders, Spacs offer a route to a public stockmarket listing that is less bureaucratic than the traditional initial public offering (IPO). They have been used to launch everything from electric-vehicle (EV) makers to space tourism business Virgin Galactic.
Around 250 Spacs launched in America last year, raising $83bn. Between February and March, 69 companies agreed to merge with Spacs, but that number has fallen to just 30 since the start of April, say Echo Wang and Anirban Sen on Reuters. Dozens of firms have ditched merger plans of late.
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
No wonder, says Heather Somerville in The Wall Street Journal. Flotations have started to flop. An analysis of tech firms that have gone public with Spacs since the start of 2020 found that share prices have since fallen by an average of 12.6%. Public markets demand quarterly updates and ask tougher questions than venture capitalists, who are more willing to take a punt.
These signs of “market discipline” are welcome, says The Economist. Some Spac deals have been driven by “extreme delusion”. Five EV firms that went public via Spacs last year say they can go from “making no [sales] to $10bn... in under five years… Not even Google [did] that”.
-
Rightmove: Asking prices edge closer to record peakAsking prices have been driven up by the top-end of the market, Rightmove has found. But how does the situation look in your area?
-
Coventry Building Society bids £780m for Co-operative Bank - what could it mean for customers?Coventry Building Society has put in an offer of £780 million to buy Co-operative Bank. When will the potential deal happen and what could it mean for customers?
-
The industry at the heart of global technologyThe semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
-
Three emerging Asian markets to invest inProfessional investor Chetan Sehgal of Templeton Emerging Markets Investment Trust tells us where he’d put his money
-
What to consider before investing in small-cap indexesSmall-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
-
Why space investments are the way to go for investorsSpace investments will change our world beyond recognition, UK investors should take note
-
Time to tap into Africa’s mobile money boomFavourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
-
M&S is back in fashion: but how long can this success last?M&S has exceeded expectations in the past few years, but can it keep up the momentum?
-
The end of China’s boomLike the US, China too got fat on fake money. Now, China's doom is not far away.
-
Magic mushrooms — an investment boom or doom?Investing in these promising medical developments might see you embark on the trip of a lifetime.
