June 7, 2023

SPACs: Insiders Got Out While the Gettin’ Was Good

A recent WSJ article highlights the rather timely exits by SPAC sponsors & early-stage investors. It says that these investors sold shares worth $22 billion before their companies’ stock prices collapsed.  Here’s an excerpt:

The Journal analyzed more than 460 companies that did SPAC deals and identified 232 with insider sales based on a review of Securities and Exchange Commission filings submitted through May 18. The analysis focused on disclosures made by investors who own more than 10% of a company and corporate officers and directors. Of those with sales, insiders at 12 companies cumulatively sold shares worth at least $500 million. Insiders at about 80% of the 232 companies sold shares valued at less than $100 million, the Journal’s analysis shows. On average, insiders sold about $22 million of shares each.

The article goes on to identify the big winners from SPAC sales – and to describe just how far many of those stocks have fallen after those insider sales.  Of course, the good fortune of these insiders compared to public investors hasn’t escaped the attention of the plaintiffs’ bar, and the number of lawsuits targeting SPAC insiders is rising fast.

John Jenkins