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· Posted on
September 27, 2022

SPACs start returning cash to investors after struggling to find mergers

SPAC has been struggling to find mergers... so it's returning raised money to investors.

What's the key learning?

  • SPACs raised $83 billion USD in 2020 and $160 billion USD in 2021.
  • Chamath Palihapitiya, one of the SPAC leaders, is shutting down 2 of his SPACs that are worth $1.6 billion USD after failing to find merger partners by their two-year deadline.
  • The post-merger performance of SPACs makes it hard to convince prospective public companies to merge with a SPAC.

👉Background: SPAC stands for Special Purpose Acquisition Company. Put simply, SPACs are shell companies set up by investors to raise money. The aim is to acquire or merge with a company looking to go public.

👉 What happened: In 2020, SPAC’s were trending harder than Joe Exotic. In fact, SPACs raised $83 billion USD that year. And SPACs raised more than $160 billion USD in 2021.

👉 What else: Now, one of the SPAC leaders, Chamath Palihapitiya has announced he’s shutting down 2 of his SPACs, worth $1.6 billion USD. He couldn’t find merger partners by their two-year deadline so the money raised will be returned to investors.

What's the key learning?

💡A rising tide floats all boats. Back in 2021, the SPAC boats were floating at the top!

💡We saw Buzzfeed merge with a SPAC, WeWork merged with a SPAC and even Virgin Galactic merged with a SPAC. But post-merger, two-thirds of SPACs are reporting a loss in value.

💡The post-merger performance of SPACs makes it hard to convince prospective public companies to merge with a SPAC. But there are still around 600 SPACs that need to find a partner in crime so watch this SPAC... I mean space.

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