The SPAC Ship Is Sinking. Investors Want Their Money Back. JANUARY 22, 2022 WORLD One of the hottest businesses of the pandemic is cooling off, as the hype surrounding ‘blank-check’ companies gives way to reality SPACs — sometimes called blank-check firms — start out as shell companies. They raise money from investors, then get listed on the stock exchange. Their sole objective is to merge with a private company and take it public. Because a going public company is merging with an existing publicly traded entity, it can make business assumptions and bypass some of the other rules associated with IPOs. After the deal is cleared by the regulators, the going public replaces the SPAC in the stock exchange. Upstart companies of all stripes flocked to participate, enamored with pools of eager investors willing to back them, and tempted by celebrity SPAC creators and bankers who put money on completing deals. The company behind dog-toy subscription service Barkbox did the SPAC merger. So does personal-finance app SoFi Technologies Inc. Office-sharing company WeWork Inc. found a SPAC after its planned IPO was discredited. Electric-vehicle battery makers, flying-taxi startups, self-driving car companies and a never-ending parade of biotech names all jumped the fray. Now, hype is giving way to reality. Like so many investing trends, what at first seemed like a way to make easy money has revealed itself to be full of potential risks. The threat of tighter regulation looms large, and high-profile stumbling blocks by some of the companies that have gone public through SPAC have taught investors some hard lessons. It turns out that investing in unproven upstarts isn’t for everyone, and speculative investments of all kinds are taking a hit, from technology stocks to bitcoin, with interest rates likely to rise in the coming months.
Most SPACs are frauds. It is very disturbing that SEC allowed them to exist. Blank check companies? They exist for decades or longer. So why suddenly they become popular? Because this is like dot com bubble #2 and there is so much dumb money out there. You can just start a SPAC and pick their money into your own pocket. IPO process is the correct way to weed out the weeds. SPAC process defeated that process.
SPACs are the subprime of going public. If your company had a compelling business you could have gotten a myriad of small Investment Banks to go public. The fact that these companies couldn't get the smallest banks to take them public means they are not viable and will likely implode like most of them have. SPCE from $63 to $8.5 DKNG from $64 to $19 NKLA from $94 to $7 Nikola's chairman was running a scam. He even faked the famous commercial where his truck was rolling down a hill. At least Draft King is still above the SPAC price.
Great, we take more of the froth out. Just say no to anything issued by a SPAC. We need healthy markets.
Actually there are already tons of SPACs over decades. A lot of them are those penny stocks that have no real business. That is what blank check companies are for. A real business can buy a blank check company who already has 10MM shares outstanding. Shares are trading $0.10 and the company can be bought out with just $1MM. It saves a lot of investment bank fees and can get to the market when the market is burning hot. That is what those SPACs are doing. Go to market in less than one year. Other than doing IPO for 2-3 years.
I was a bit early calling the epic spac bubble, but here it is in 2 words!!!! December 2020 https://www.elitetrader.com/et/threads/2-words.353836/#post-5276501
As I said, those things existed many many years ago. They get no value themselves. Only instruments to go public quickly.
What's funny is that it was such an obvious and blatant fraud from day one, yet the equity markets & investors still let it all play out, along with GM and one other corporate (Bosch, I think)
SPACs failed in their first time around, but a lot of inexperienced millennial money helped to fund the SPAC 2.0 craze. Another lesson learned, we (anyone who's been around long enough) knew this was coming. Nothing to see here folks, move along now.
To me, QS will go down as the poster child of the 2021 Dotcom 2.0. A research company with no projected revenue for many years, but was worth as much as Ford as one point. They're the modern day pets.com