Is The Blank Check Firm Boom Burning Out?

Despite their recent popularity, special-purpose acquisition companies (SPACs) still can’t quite compete with traditional initial public offerings (IPOs).

That’s according to a new report from Bloomberg, which found that SPACs — also known as blank-check firms — accounted for just over a third of global activity so far this year, with 330 listings. Last year saw 300 SPACs unveiled, leading to investor concern about their potential to find viable acquisition targets and increased competition for the market’s most attractive assets.

And 2020 was a huge year for IPOs, with nearly 400 such offerings in U.S. markets alone. The 2020 reading was 20 percent higher than what was seen in 2000, the previous highest IPO year.

According to Bloomberg, data show that this year, SPACs are trading up around 1.2 percent “on an offer-to-date basis,” while traditional IPOs are up 36 percent. “The strong performance for traditional listings signals there is brisk appetite for new companies coming to market, while investor sentiment toward SPACs is cooling,” the news outlet said.

Retail traders helped fuel a strong SPAC stock rally earlier this year amid news of numerous potential deals. The U.S. IPOX SPAC index, which tracks shares in blank-check firms, has fallen 21 percent since its peak at the end of February, per Bloomberg.

“The billions of dollars that have flown into SPACs over the past year means there’s much more competition for attractive takeover targets, which diminishes the prospects of lofty returns for blank-check firms,” Stephane Monier, chief investment officer at Lombard Odier & Cie, told Bloomberg.

As PYMNTS reported earlier this week, SPACs could face an additional hurdle as they face more scrutiny from the SEC. Numerous SEC officials have called on investors to exercise caution around SPACs.

Most recently, John Coates, acting director at the SEC’s corporate finance unit, warned of “some significant and yet undiscovered issues” with SPACs.