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The SPAC market starts 2022 with abysmal losses, abandoned deals


Coworkers comfort a trader as they sit on the New York Stock Exchange’s floor on March 1, 2018, in New York City.

Eduardo Munoz Alvarez / Getty Images

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In the New Year, the oversaturated SPAC Market continues to be crushed as speculative stock with low earnings continue to fall out of favour in the face rising rates. Additionally, a greater number of deals are being abandoned in this difficult environment.

The tech-driven selloff of January has had a devastating effect on those companies who went public through blank-check agreements. Many sponsors were forced to cancel their deals due to unfavorable market conditions.

“The SPAC bubble is bursting,” said Chris Senyek, senior equity research analyst at Wolfe Research. Due to their speculation nature, SPAC shares can be extremely volatile.

The proprietary CNBC SPAC Post Deal IndexSPACs who have completed their mergers, and took their target companies public in their SPACs, fell by 23% in Jan, making it even more disappointing than the tech-heavy. Nasdaq CompositeIts loss of 9% in March 2020 was its largest since March 2020.

Last month, the clean energy industry was one of the worst losers HeliogenRelated companies in the self-driving technology sector Aurora Innovation EmbarkA 3D Technology Company MatterportAll of them fell more than half a month.

SPACs are special purpose acquisition corporations. They raise capital through an initial public offer and then use that cash to merge with private companies and make them public. Usually, this happens within two years.

SPAC Research data shows that the market experienced a record year in which $160billion was raised on U.S. markets in 2021. That’s nearly two times what happened last year. These empty corporate shells were once the target of investors who hoped to hit a homerun.

According to SPAC Research, almost 600 SPACs are looking for acquisition targets after a year of increased issuance. Some deals that were announced failed to materialize due to the increasing competition in this market.

At the close of the last year, Fertitta Entertainment’s planned merger with blank-check company Fast Acquisition Corp was canceled. Some of the recent deals to be scrapped include Acorns fintech company, ServiceMax cloud-based software platform and online grill seller BBQGuys. 

There has been an increase in SPAC listing withdrawals. This means that sponsors have decided to terminate their S-1 listing. According to SPAC Research, there were almost 20 of these cases during January. This is a significant increase from the single-digits for the previous two quarters.

— CNBC’s Gina Francolla contributed reporting.

Disclosure: Comcast Ventures and NBCUniversal are both investors AcornsCNBC and CNBC have a content partnership.