It seems safe to say that the halcyon days of the blank check company are behind us.
A meteroric rise for the special purpose acquisition company (SPAC) has been followed by a notable slide, where new issuances have been muted, to put it mildly.
And in certain subsectors within financial services and in the digital realm, especially, we’re seeing an outright freeze.
Bloomberg underscored this point on Wednesday, reporting that crypto companies have been pushing back their target dates to list shares — and have been doing so because of a tougher regulatory environment.
Among the companies that have been in limbo: stablecoin stalwart Circle and crypto exchange company eToro.
At the center of it: the heated topics of disclosure, guidance and accounting.
And in the meantime, the clock ticks. The SPACs – which are basically vehicles that look to make an acquisition and then list that acquisition publicly — have two years in which to make a deal … or face investor redemptions. eToro, in one example, has to complete its SPAC deal by the end of the month.
As is specific to the crypto segment of SPACs, a reported 5 of 14 deals announced since 2019 have closed.
But the bifurcation between SPAC listings and more “traditional” IPOs can be seen in PYMNTS’ own data, displayed in the chart below. Here we note that the banking sector has seen a preponderance of SPAC announcements, at 17 — but the activity is muted, to say the least. We’re a long way from the heady days of last year, when hundreds of SPACs across all manner of sectors sought to come to market. In PYMNTS’ own estimations, banking related listings last year totaled 66, which gives an indication of just how muted things have become.
The friction of bumping up against regulators is a significant headwind. As reported earlier in the year, SPACs are being increasingly scrutinized because of their projections made in financial documents. Elsewhere it was reported that about three quarters of all financial restatements made to the SEC last year came from SPACs.
Read more: Data Shows 77% of Financial Restatements to SEC Were SPACs
Add in the vagaries of this market, and soaring interest rates, and investors will be looking for higher returns amid volatility than might otherwise had been acceptable before. The Fed has just hiked interest rates by 75 basis points, so this adds another hurdle that SPACS would face in sealing any deals.
No easy path lies ahead, but the salad days of blank-check deal making lie behind.
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