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Opinion

SEC takes the heat out of Spac frenzy

The Spac bubble has burst, and while European exchanges try to attract more deals, sponsors that listed in the boom will soon be struggling.

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What a falling off was there.

After the extraordinary boom in new special purpose acquisition companies (Spacs) in 2020, when 248 IPOs of blank-cheque companies raised $83 billion – up from 59 listings worth $13.6 billion in 2019 – the first quarter of 2021 saw a frenzy.

During the first three months of this year 320 Spacs went public raising $88.5 billion, with 100 in March alone in the US, plus another seven in Europe and Asia.

In April, there were just 12. And after three weeks of May, there had been the same number.

Daily trading volumes have collapsed and so have prices, with shares in three quarters of Spacs now changing hands at below issue price.

Why has the mood changed so suddenly and so sharply?

There are two reasons.

Spacs that listed early in 2020 and have still not found a target will become desperate to do any deal before they have to hand that cash back

First, the pace of new issues had become unsustainable. Most de-Spac mergers, the key moment when these companies find their target, come with a large capital raise through a private investment in public equity (Pipe).

There

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