A score of SPAC merger companies that listed during the boom are warning they probably won't survive much longer
- 25 companies that merged with a
SPAChave warned they could go bust within a year, according to a data analysis firm.
- These companies listed by merging with a blank-check company rather than through a traditional IPO.
25 companies that listed during the SPAC boom of 2020 and 2021 have already issued warnings that they could go bust within a year, according to a data analytics firm.
Audit Analytics found that 10.8% of the 232 stocks that merged with blank-check companies over the past two years have issued going-concern warnings, which indicate a company will struggle to stay afloat over the next 12 months.
A SPAC, or special purpose acquisition company, raises money through an IPO and then aims to acquire or merge with another company. Chamath Palihapitya is one high-profile sponsor, while companies including Lucid Motors and Virgin Galactic have merged with
These blank-check vehicles raised $96 billion in the first quarter of 2021 alone, according to the Harvard Business Review.
But the market has struggled since that boom. Morgan Creek's Exos SPAC Originated ETF, which tracks these vehicles, is down 44% over the past year.
21 of the 25 vulnerable companies had revenue less than $100 million in 2021, according to Audit Analytics. Just under 6% of all the stocks listed on the New York Stock Exchange and Nasdaq issued going-concern warnings last year, the firm's director of research Derryck Coleman told Insider.
SPACs tend to merge with high-growth tech companies that are keen to avoid the traditional IPO process. These sorts of stocks have struggled this year as investors weigh up rising interest rates and
"The cycle turned and investors rotated to different sectors," Julian Klymochko, who runs a SPAC arbitrage fund, told Insider. "The bloom is off the rose for many unprofitable small-cap hyper-growth companies that recently went public… they need to batten down the hatches to live to fight another day."
An air-taxi manufacturer, several electric carmakers and a scooter rental company are among the post-SPAC merger stocks that issued going-concern warnings, according to the Wall Street Journal.
"These companies are in trouble now as they are not self-funding and early-stage start-ups have by and large lost access to capital," Klymochko said. "If investors no longer want to fund these cash-burning businesses, then unfortunately they need to consider strategic alternatives."
- A Google engineer of 8 years says his 'spidey-senses' detected incoming layoffs — and felt 'isolated' when his 'faceless' severance email arrived
- A Google employee of 11 years says he and his wife stared at each other in 'disbelief' when they realized they'd both been laid off by the company
- A Google recruiter says he discovered he'd lost his job after a call with one of his candidates suddenly disconnected
- Google may release Pixel Tablet Pro with Tensor G2 chip
- BMW launches its 3rd gen BMW X1 in India
- YouTube Music on the web gets mood filters
- Premium segment contributed 35% of overall smartphone market revenue in 2022
- US industry urges FM to rationalise, simplify direct and indirect taxes in India