Medha Singh, Bansari Mayur Kamdar, and Bansari Mayur Kamdar

(Reuters) – Shares of several companies including Grab Holdings, BuzzFeed and BuzzFeed that merged with shell organizations to become public fell as investors pulled the rug from under them. This is in response to Wall Street’s frenzied blank check deals.

BuzzFeed’s shares have plummeted 40% in the four years since they were launched on December 6. As 94% of the investors returned their investment, $16 million was raised by the digital media company from $288 million.

Grab Holdings is the largest ride-hailing company in Southeast Asia. It lost half of its market capitalization after its Nasdaq debut Dec. 2. The merger between Grab Holdings and a blank-check business, a record for $40 billion, saw Grab Holdings become Asia’s largest delivery and ride-hailing firm.

Edward Moya (Oanda’s senior market analyst) stated, “A lot more investors are now looking toward companies with proven track records, and that have shown history of delivering profits.” “The frenzy driving some momentum in SPACs earlier in the year is clearly over,” said Edward Moya, senior market analyst at Oanda.

SPACs are shell companies which raise capital in an initial public offer (IPO). They then put that money into a trust to be used for merging with a private firm and making it public.

Investors are not aware of target companies before the IPO. SPACs frequently grant investors the right to recoup their initial investment to incentivize them to invest more.

Dealogic data showed that the average redemption rate increased more than twice to 58% during the fourth quarter compared with a year ago. This is a result of many businesses falling short of investor expectations.

In the case of Zoom Video Communications-backed event management software company Cvent, nearly 85% of investors redeemed their shares for cash two days before its debut, its filing showed.

Vacasa, a vacation rental management company, has a gross revenue of approximately $340million since its Dec. 8 debut. This is $145 million less than its expected due to redemption.

SPACs became a frenzied market in February when investors began treating them like meme stocks. “Then Lucid crashed, and the SEC started issuing negative comments. SPACs began to fall out of favor,” stated Matthew Tuttle chief executive officer at Tuttle Capital Management LLC.

Last week, U.S. regulators stated that they are considering tightening regulations regarding how SPAC sponsors, directors, and underwriters structure fees, make projections, and disclose conflicts.

According to Vanda Research (NASDAQ:), SPACs have been among those that have experienced a decrease in investor participation.

De-SPAC’s index tracks 25 companies that have successfully completed blank-check mergers. It is currently down 43% after reaching an all-time high of mid-February.

However, merging with firms that are not checked is still an option. Renaissance Capital reported in its annual review 2021 as a record-breaking Year, when 604 SPACs raised $144 Billion. However, 62% were only raised within the first quarter of the whole year.

Grab, BuzzFeed Vacasa, Cvent and Grab were not available immediately for comment.