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ANALYSIS: YTD Post-Merger SPAC Performance Is Mostly Negative

June 11, 2021, 9:01 AM

As we approach the midyear mark, we are checking back in on the market performance of de-SPACed entities—the formerly private companies that have recently gone public by merging with a special purpose acquisition company. In February, things looked mixed, but we really can’t say that now.

Year-to-date, most post-merger U.S. SPACs are not performing well. Two-thirds of the 36 currently publicly traded de-SPACed U.S. companies that were taken over by U.S. SPACs that went public on or after Jan. 1, 2019, and whose de-SPAC transactions were announced and completed since Jan. 1, 2019, and for which at least one month of post-merger performance data is available, are reporting a loss in value. And for the most part, we aren’t just talking about small dips: The average depreciation in value of the 24 negatively performing post-merger entities is 26%, with the two worst performers reporting a loss in value of over 60%.

For the 12 positive performers that represent only one-third of these de-SPACed entities, the average appreciation in value is 20%.

The pace of SPAC IPOs and mergers has been slowing down in general and that’s probably for the best, given these results.

At the Bloomberg Deals Summit this week there was a general consensus among top dealmakers—including Anu Aiyengar of JP Morgan, Michal Katz of Mizuho Americas, Kim Posnett of Goldman Sachs, and Scott A. Barshay of Paul Weiss LLP—on where SPACs are headed. They emphasized that SPACs are not for every company looking to go public (a warning amplified by this performance). They also predicted that SPACs are going to endure, but the market will likely evolve, innovate, and hopefully become more settled. That evolution, which Barshay predicted will involve fewer “deals where there’s really no cash flow and really no business yet” and more “good, strong companies using SPACs to go public,” would potentially improve overall post-merger SPAC performance if it takes place.

Note: Our data set, which is current as of June 8, 2021, includes de-SPACed companies that are currently publicly traded on U.S. exchanges that went public, as a result of being taken over by SPACs that began being traded on U.S. exchanges or after Jan. 1, 2019, via completed de-SPAC deals announced between Jan. 1, 2019, and May 7, 2021. For the sake of clarity, the data set does not include pending de-SPAC transactions, only completed transactions. The months elapsed listed on the tables above represent the number of months elapsed since the completion date of the de-SPAC transaction.

With assistance from Nageen Qasim, Bloomberg L.P.

Bloomberg Law subscribers can find related content on our Equity Offerings Deal Analytics and our In Focus: SPACs resources.

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