Special Purpose Acquisition Companies (SPAC’s) are encountering an even worse market heading into 2023. Within the span of an hour on Monday, nearly $11 billion USD worth of SPAC deals collapsed.
For reference, the Securities and Exchange Commission defines that “A SPAC’s sole purpose is to identify a target operating company and consummate a business combination.” Essentially it means having a private company get bought by a public company whose sole purpose is to bring that private company to an IPO, and have no other operation on its own.
A respected leader in the SPAC space, Alec Gores, stated on Monday that Gores Holdings VIII Inc. and materials science startup firm Footprint would not be partnering. Cathie Wood (owner of the ARKK fund), and a massive amount of retail traders suffered a setback when Concord Acquisition Corp., whose chairman is former Barclays CEO Bob Diamond, ended its deal with the stablecoin issuer Circle. This is due to the SEC not certifying the agreement between the two parties within the timeframe agreed upon by Circle and Concord.
As the market turns against risky bets, the SPAC space had more than 55 purchases fall through this year alone. The 55 deals that died are just a fraction of the 65 sponsors that have shut their doors to business permanently.
A wider sell-off in riskier investments has hurt the SPAC market as investors worry about increased regulation from the SEC. In comparison to the S&P 500 Index’s 13% drop from the previous 12 months, the De-SPAC Index has plummeted 71%.
