US banks withdraw from special purpose acquisition companies

Just a few years after banks helped create a gargantuan market for blank-cheque companies, they’re pulling away from the deals due to fear of the risks.

“The SEC continues to spoil an already rather lame Spac party,” said Oliver Scharping, a portfolio manager at Bantleon. “There’s virtually no money to be made with new issuances right now.” And so far, it has put the brakes on for Wall Street’s biggest banks, with others expected to follow. Citigroup paused initial public offerings of new US Spacs until it gets more clarity on the potential legal risks posed by the guidelines, Bloomberg reported in April.

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