London Looks to Un-Meme the SPAC Market

a fund that tracks the shares of De-SPACs, or former SPACs, has lost two thirds of its value in a year.

But top European De-SPACs have done noticeably better than their American counterparts, falling only about a third. Those few that trade in London and Amsterdam also have outperformed those listed in New York since the day of their merger. London hosts more “old economy” De-SPACs, like National World—publisher of regional newspapers The Yorkshire Post and The Scotsman—and boutique wealth manager Oberon; the flashier British startups, like electric-vehicle maker Arrival, choose the U.S.

There are other reasons why SPACs have crossed the Atlantic. Until last year, the U.K. applied some draconian rules to the vehicles, such as the assumption that trading in their shares would be suspended after a deal announcement. As these were eased, activity surged. Meanwhile, the Securities and Exchange Commission is moving to narrow the gap in oversight between traditional IPOs and U.S.-listed SPACs, which is also reducing the space for trans-Atlantic arbitrage.

It still isn’t clear whether SPACs can remain popular once scrutiny increases. Yes, firms establish direct connections with knowledgeable sponsors who focus on growing the business, as opposed to spending months on IPO roadshows. But today’s situation shows that the much-touted “early price discovery” through merger talks provides little security against adverse markets.Europe, and particularly London, may provide a clue to SPACs’ future.

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