January 5, 2023

SPACs: The Wall Street Journal Says “Stick a Fork in ‘Em”

The SPAC industry received an unwelcome present on Christmas Day when the WSJ announced that the party was officially over:

During the boom in blank-check companies, their creators couldn’t launch them fast enough. Now they are rushing to liquidate their creations before the end of the year, marking an ugly conclusion to the SPAC frenzy.

With few prospects for deals soon and a surprise tax bill looming next year, special-purpose acquisition companies are closing at a rate of about four a day this month, nearly the same pace they were being launched when the sector peaked early last year.

Roughly 70 special-purpose acquisition companies have liquidated and returned money to investors since the start of December. That is more than the total number of SPAC liquidations in the market’s history, according to data provider SPAC Research. SPAC creators have lost more than $600 million on liquidations this month and more than $1.1 billion this year, the data show.

The Journal says that many more SPACs had announced plans to liquidate by the end of 2022, and that one reason for the rush to get those done was the impact of the 1% excise tax on buybacks that became effective on January 1, 2023.

John Jenkins