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Rising number of blank-cheque companies call it quits before listing


More blank-cheque companies are abandoning their hunt for deals before it has even begun, in another sign that momentum is slowing in the once-brisk Spac market.

Seven Spacs, or special purpose acquisition companies, that altogether intended to raise more than $2.5bn have written to the US Securities and Exchange Commission to cancel planned initial public offerings since the start of January. The latest withdrew its registration statement late on Thursday.

Five Spacs withdrew IPO plans in December compared to only three withdrawals in the first 11 months of 2021, according to analysis of regulatory filings compiled by Sentieo, a data provider.

Spacs are shells that raise money by listing on the stock market seeking a merger with a target company, providing them with a faster route of going public. Last year, Spacs raised more funds than traditional IPOs for the first time.

But investor enthusiasm has waned in recent months because of a combination of poor performance, harder regulatory scrutiny and several high-profile scandals.

Column chart of Number of withdrawn IPO registrations showing Spacs shy away from stock market

Some of the recent withdrawals were from Spac sponsors that had ambitions to become repeat issuers after thriving early in the boom.

“There was a weird moment last year when the market was just so on fire that some sponsors were saying, ‘I’m going to file four or five vehicles at once, so as soon as I get one done I can move on to the next’,” said one senior banker. “Obviously, that strategy has now come face to face with the reality that business combinations are hard to pull together.”

Riverside Management Group raised $1.1bn through three Spac IPOs between February 2019 and February 2021. The last Spac that listed has yet to find a merger target.

After completing its most recent IPO, Riverside filed with the SEC to create four new blank-cheque companies simultaneously. But last week it cancelled three of the four unused registrations, the largest of which had sought to raise $725m. Riverside did not respond to a request for comment.

Most Spacs have a deadline of between 18 months and two years to complete a deal after listing on the stock market, after which they have to return all the money raised to investors.

Since the start of 2020, more than 850 Spacs have completed IPOs and close to 600 are still seeking a target. About 270 have registered with the SEC but have yet to complete an IPO, according to Dealogic.

The rise in withdrawn Spac IPOs comes as blank-cheque companies that have listed struggle to find suitable companies with which to merge.

“A lot of good value portfolio companies have been gobbled up,” said Andrea Merediz Basham, partner at Freshfields. For the hundreds of Spacs that completed their IPOs, “I think we are going to see more Spacs expiring without having found targets in 2022 than we did in 2021 and 2020.”



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