SPAC increase fizzles out as buyers money out huge names – business insurance

(Reuters) – Several companies, including Grab Holdings and BuzzFeed, which partnered with letterbox companies to go public, lost their shares as investors tore the ground beneath the stocks that drove at the maddening blank check this year Deals on Wall Street were hyped.

Shares in BuzzFeed, which merged with blank check firm 890 5th Avenue Partners, have plummeted 40% since debuting on Dec. 6, with investors taking their money back.

Grab Holdings, Southeast Asia's largest ride-hailing and delivery company, has lost half its market cap since its Nasdaq debut on December 2, after the company merged with a record $ 40 billion blank check company.

"Many investors are now increasingly looking for companies with proven track records that have historically generated profits," said Edward Moya, senior market analyst at Oanda. "The frenzy that drove some of the momentum in SPACs that we saw earlier this year is clearly gone."

Purpose acquisition companies are shell companies that raise money as part of an IPO and bring it into a trust fund in order to merge with a private company and bring it to the stock exchange.

Because investors don't know the target company prior to going public, SPACs often grant them the right to repay their initial investment in order to put their money in the trust.

The average repayment rate more than doubled to 58% year-over-year in the fourth quarter, data from Dealogic showed, as many companies fell short of investor expectations.

In the case of event management software company Cvent, backed by Zoom Video Communications, nearly 85% of investors traded their shares for cash two days prior to debut, according to the filing.

Vacation rental management company Vacasa posted gross proceeds of approximately $ 340 million on its December 8 debut, down $ 145 million from expectations due to the repayment.

Vacasa's business is well capitalized on the SPAC deal as more than 50% of the cash was withheld in the company's escrow account, CFO Jamie Cohen told Reuters.

“SPACS went crazy in February and investors started looking at them like meme stocks. Then Lucid crashed and the SEC began making negative comments and SPACs fell out of favor, "said Matthew Tuttle, chief executive officer of Tuttle Capital Management LLC.

U.S. regulators said last week they are considering tightening rules on how underwriters, boards of directors, and sponsors of SPAC structural fees, issue forecasts and disclose disputes.

According to Vanda Research, SPACs are among the group that has seen retail investor participation decline.

The De-SPAC index, which tracks the 25 largest companies that have completed a blank check merger, has fallen by around 43% so far this year after hitting a record high in mid-February.

Still, merging with blank check firms remains a popular option, with 2021 being a record year with 604 SPACs raising $ 144 billion, Renaissance Capital announced in its annual review. However, 62% of total annual sales were achieved in the first quarter alone.

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