Only companies whose financials wouldn’t survive investor scrutiny en route to a traditional initial public offering used SPACs to go public.
“You could see this cliff coming,” said Usha Rodrigues, a professor of corporate law at the University of Georgia School of Law who has emerged as a leading expert on SPACs.Īlthough SPACs had been around for decades, they long had an unsavory reputation. Increased regulation would make SPAC deals less profitable for the big investment banks that arrange these transactions, because they would have to commit more resources to comply. The Securities and Exchange Commission has opened dozens of investigations into SPACs and is proposing tighter rules. With stocks of high-growth companies recently getting clobbered, they have been less willing to bet that SPAC mergers - which often involve risky companies - will be successful.Īt the same time, regulators are stepping up scrutiny of SPACs. Increasingly, investors are withdrawing their money from SPACs, which they’re allowed to do at the time of the merger. Wall Street’s love affair with SPACs is sputtering.Īfter two hot and heavy years, during which investors poured $250 billion into SPACs, rising inflation, interest rate increases and the threat of a recession are fomenting doubts. “But the market completely turned on us.” “We did months and months of work to get Kin ready to go,” Mr. He is liquidating Omnichannel and returning the $206 million his SPAC raised to investors.
But in January, the two sides called off the deal, citing “unfavorable market conditions.” In May, Mr. Higgins, agreed to buy Kin Insurance, a fintech company. Last summer, Omnichannel Acquisition, the SPAC backed by Mr. Investors get their money back if the SPAC hasn’t found a business to buy within a two-year window. Special purpose acquisition companies - known by their acronym - are shell entities that sell shares to the public and use those funds to buy an operating business.
Higgins embraced one of Wall Street’s biggest recent obsessions by launching a SPAC. So it was no surprise that in November 2020, Mr.
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Matt Higgins, a former judge on the reality TV show “Shark Tank,” is an experienced investor whose firm, RSE Ventures, helps young companies build their businesses.
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