Shares of special-purpose acquisition companies (SPACs) have fallen out of favor a bit since their all-time highs, the Financial Times reported on Sunday (May 2). The values of the shares have fallen by an average of nearly 40 percent since their highs.
Out of a group of 41 SPACs that have completed transactions since the beginning of 2020, only three are still within a 5 percent range of their peak share prices, according to FT. Eighteen of them have at least been cut in half, and some of them are down by as much as 80 percent, with an average decline at around 39 percent.
As recently as less than two months ago, SPACs were highly sought-after by investors, as the shares were boosted by the companies announcing acquisition plans. But as regulators start to look more closely at the SPACs, examining the companies’ disclosures and revenue forecasts, deals are now taking longer to go through. The added scrutiny has caused some institutional investors to proceed more cautiously when dealing with the SPACs, and the new SPAC investments have “slowed to a trickle,” according to FT.
PYMNTS recently reported on this phenomenon, writing that April only saw 10 SPAC deals on the table as opposed to the 109 in March. However, the report noted that some companies are still going strong, with UiPath, a software firm that went public via SPAC, starting its first trading day at $56 and ending at $69. The company also boosted its deal size ahead of the offering by 28 percent.
And SmartRent.com, which works in smart home technology, managed to fetch a valuation of $2.2 billion, according to reports, as it stands ready to go public with a SPAC called Fifth Wall Acquisition Corp. Meanwhile, China-based Infobird Co., a Software-as-a-Service firm, listed shares on the Nasdaq, with the listing starting at $4 and at one point standing at over $11.
Larry Harris, the Fred V. Keenan chair in finance at the USC Marshall School of Business, said there could be some risk for investors as premium valuations were in the offing.
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