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Nothing quite captures that you only live once mentality of investors during the early days of the pandemic as Spacs, short for special purpose acquisition companies. These blank cheque companies emerged from the backwaters of finance to become one of the most in-demand asset classes on Wall Street.
They pulled in celebrities, well-known financiers, and retail investors, raised hundreds of billions of dollars in cash, and struck mega deals at an unprecedented pace. But the Spac craze has almost certainly come to an end. Bruised by the terrible performance of companies that went public through these vehicles, angry investors have abandoned the market and a tough regulatory environment.
How it all happened will be a story for the ages. Companies that were valued at tens of billions of dollars are today worth just a fraction of that amount. And some have even filed for bankruptcy. Spacs raised almost $100bn in the first quarter of 2021 alone. But when regulators set their sights on the nascent market, the impact was felt quickly.
Spac listings dropped dramatically, and deals that were once certain to close started to look shaky. Few investors wanted to provide financing. And when time came to close the transaction, most shareholders asked for their money back even companies that opted for the Spac route with very little cash in their coffers. To make matters worse, banks that spent the past two years wooing sponsors and companies are backing off after making hundreds of millions of dollars in fees.
In a final blow to the market, hedge fund billionaire Bill Ackman was forced to liquidate his record breaking $4bn Spac just weeks before a two-year deadline to find a deal approach. His blank cheque company was widely expected to strike the biggest Spac transaction ever. Instead, shareholders are getting their money back.
A similar fate is expected for most Spacs still looking to find targets. Most experts now expect blank cheque companies to go back to where they were prior to the 2020 boom - the dark corners of financial markets.