Once the golden child of Wall Street and retail alike, SPAC mergers are now falling in two ways — falling apart and falling down. 👎
Let’s dig into the “falling apart” part. A Bloomberg article published today claims that SPAC mergers are “falling apart at a rapid pace.” That’s literally the headline. The article then claims that 22 deals have been spiked since the middle of 2021, which compares to 26 called off in the five years prior. 😬
The article suggests that many deals have fallen apart because of redemptions — which stem mostly from disinterest in deals. In recent weeks, we’ve seen this first-hand as Binance picked up the tab for a $200 million investment in Forbes. The tab was run up by committed capital from large money managers, which then decommitted and offered some cap space for an enterprising new investor. However, Bloomberg also mentions some other companies by name — Acorns, Reservations.com, and Pioneer, to be specific.
SPAC mergers aren’t just falling apart — they’re falling down. The Defiance Next Gen SPAC Derived ETF, or $SPAK for short, tracks some 373 holdings. It’s a mix of SPACs seeking a merger, SPACs which have issued Definitive Agreements (DAs), and SPACs which have merged. Among the top holdings are stocks such as Lucid, Grab, Pershing Square Tontine Holdings, and DraftKings.
One crucial takeaway from the $SPAK ETF is that money is drying up in the once star-studded space. $SPAK is down 48.8% in the last year, which is an even worse than the return posted by its IPO-tracking cousin, the Renaissance IPO ETF. $IPO is down 39.4% YoY.
So, what’s the takeaway? Everybody is getting hammered by newfound macroeconomic and geopolitical tension 🥊 — but perhaps no more than the market’s newest entries. All those pandemic-era IPOs and SPACs, which turned into hot momentum trades, are not faring so well in this cold market. 🥶
Based on how things are looking, there might be a lot more downside still to come… or maybe this downward trend will invert and all the new names will go to the moon?! That’d be great, right? 😂 Jokes aside, nobody knows what comes next… or maybe you think you do. Tell us what you think lies ahead in the $IPO and $SPAK streams!!