Goldman Sachs Group Inc. said it’s taking a break from handling special-purpose acquisition company , or blank check, initial public offerings amid a sharp slowdown in the market in recent months.
The move comes after the SPAC market has fallen off a cliff in 2022 amid increasing volatility in the stock market as investors grapple with rising inflation and concerns over a potential recession. Read MarketWatch’s “Market Snapshot” column. Meanwhile, the S&P 500 index SPX, +0.83% has dropped 15.0% year to date, after being up 11.5% over the same period a year ago.Citigroup Inc. C, -2.20% led the league tables in 2021 with a 13% share of the SPAC market via 108 SPAC deals that raised a combined $21.7 billion. Goldman Sachs GS, -0.92% raised $15.5 billion in SPAC proceeds last year via 66 SPAC IPOs, followed by $13.8 billion for Cantor Fitzgerald & Co. via 60 deals, Credit Suisse Group AG CS, +1.44% CSGN, -0.19% with $12.
Currently about 80% of the SPACs that have gone public will not result in a merger. Many of the SPAC underwriting fee contracts for investment banks will pay 2% of the deal value to take the company public and 3.5% of the deal if a merger is completed. Sponsors typically put up $8 million to take a SPAC public. If 600 mergers don’t take place, since recently only about 10 mergers have been completed each month, that amounts to about $4.8 billion in equity that sponsors will lose.
GoldmanSachs, you think we have not been watching this whole time? Do you feel safe?
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