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Spac euphoria turns into painful reckoning as liquidity runs dry

Bloomberg
Bloomberg • 5 min read
Spac euphoria turns into painful reckoning as liquidity runs dry
Photo: Bloomberg
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One of the hottest pandemic-era trends in investing is receding back into obscurity after more than a billion dollars in losses for backers of special-purpose acquisition companies.
In the first four months of 2023 alone, sponsors of SPACs with some US$74 billion in cash will need to find targets to buy or move to dissolve their funds, according to data compiled by Bloomberg. Assuming the shopping spree comes up empty, this will likely mark the end of a frenzy that saw more than 800 of the funds raise almost a quarter-trillion dollars in 2020 and 2021. The euphoria has worn off, with hundreds of sponsorship teams expected to throw in the towel through early next year.

It’s a painful comeuppance for an industry that during its go-go days attracted legions of retail investors for projects that were tied to celebrities, politicians and athletes — but more often than not turned out to be a bust. The mania turned Chamath Palihapitiya into the “SPAC King” and burned investors backing companies tied to flashy names like Shawn “Jay-Z” Carter, Shaquille O’Neal and Martha Stewart. Now, the funds will likely return to being a niche product led by experienced professional investors.

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