Commentary: Grab’s blockbuster deal comes at questionable time for SPAC market

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Some special acquisition purpose company deals are genuinely innovative, but others feel like the last days of a bubble, says the Financial Times’ ...

on Tuesday that it will use a special purpose acquisition company to float on NASDAQ at a value of close to US$40 billion.But the rest of the SPAC market is deflating rapidly, with potentially dire consequences for investors and entrepreneurs who hope to tap a relatively quick method of joining a stock market.

Some are genuinely innovative, but others feel like the last days of a bubble: Six de-SPACs involve makers of lidar sensors for self-driving cars; at least three are electric vehicle charging companies; and five electric vehicle makers are each promising to reach US$10 billion in sales in record time.There is trouble looming. Many SPACs take on such large targets that they need extra funding at merger time, and the institutional investors who usually pony up are growing reluctant.

The US Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, United States, on Jun 24, 2011. The numbers of SPAC IPOs and de-SPAC mergers coming to market have fallen since mid March. The Ipox SPAC index, which tracks share prices and had risen 26 per cent by mid-February, has given up this year’s gains.

In 2021, SPACs that have merged with tech companies have paid on average nearly 13 times the previous year’s revenue, more than quadruple that paid when one tech firm bought another, says 451 Research. The structure carries high fees and risks, and bigger participants get much better deals than retail investors. But after years of being shut out as promising companies have stayed private, some people would like to buy in.

 

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