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Goldman Sachs is shrinking its SPAC business amid regulatory crackdown and market turmoil


Traders working at the New York Stock Exchange (NYSE). New York, May 9th 2022.

Brendan McDermid | Reuters

Goldman Sachs has cut its operations in once-hot SPACs, as the blank-check deal market was caught between a regulatory crackdown in China and a tough market.

CNBC spoke with Maeve duVally, Goldman’s spokesperson, about her decision to reduce our participation in the SPAC industry in light of the changing regulatory environment.

Bloomberg News first reportedGoldman made the announcement Monday morning. Goldman announced that it was ending its association with sponsors while halting new issuance. Sources familiar with the matter said so.

March, Securities and Exchange Commission introduced a host of new rulesThe proposed rules would make the SPACs one of most comprehensive attempts yet to crack down on blank check companies. Proposed rules will amend Safe Harbor rules, and open SPACs to lawsuits from investors for making too optimistic business forecasts.

Meanwhile, SPACs — which are often speculative stocks with little earnings — have been crushed this year in the face of rising rates as well as elevated market volatility. This proprietary CNBC SPAC Post Deal IndexThe SPACs which have successfully completed mergers with their targets companies and made their public shares has fallen more than 40% in the past year.

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

According to SPAC Research, more than 600 SPACs are looking for acquisition targets after a record year of increased issuance in 2021. Some announced deals fell apart as the market changed. Numerous sponsors were forced to cancel their deals. sometimes even before the SPACs got listed.