More than half a dozen blank-check firms have been liquidated so far this year, according to SPAC Research data, and I anticipate plenty more will fold in the coming months. The Securities and Exchange Commission has made banks leery of facilitating mergers, and shareholders are increasingly asking for their money back rather than funding transactions. Many of these cash-shells are also running up against the two-year deadline they have to complete a deal.
Bill Ackman’s decision to return US$4 billion to investors rather than pursue a suboptimal SPAC deal shows admirable restraint. But it’s unlikely to mollify the punters who piled into his Pershing Square Tontine Holdings (known to most as PSTH). Not only did he fail to pull off an attractive merger but amateur investors got burned speculating in PSTH securities hoping he would. Ackman’s offering them a consolation prize: it’s just not clear yet how viable and valuable that gift is.
Ackman isn’t the first SPAC sponsor to realize that blank-check firms have reached a dead end, but as PSTH is the largest ever raised it’s still a grim milestone for the asset-class.
