SPACs wipe out half their value as investors lose appetite for risky growth stocks

A trader works on the floor of the New York Stock Exchange (NYSE) in New York on June 16, 2022.

Brendan McDermid | Reuters

SPACs, once Wall Street’s hottest tickets, have become one of this year’s most hated trades.

The proprietary CNBC SPAC Post Deal Index, which is composed of SPACs that have completed their mergers and taken their target companies public, is down nearly 50% this year. The losses more than doubled the S&P 500’s decline in 2022 as the stock benchmark turned bearish.

The appetite for these early-stage, low-yield speculative growth stocks has waned amid rising interest rates and heightened market volatility. Meanwhile, a regulatory crackdown is drying up the pipeline as bankers began curbing their deal-making activities in the space.

“We believe SPACs need to evolve to meet challenges,” said James Sweetman, senior global alternative investment strategist at Wells Fargo. “General market volatility in 2022 and an uncertain market environment leading to losses in public markets have also dampened enthusiasm for SPACs.”

This year’s biggest laggards in this space include British online used-car startup Cazoo, mining company Core Scientific, and autonomous driving company Aurora Innovation, all of which are down more than 80% in 2022.

SPACs stand for special purpose acquisition companies that raise capital in an IPO and use the money to merge with a private company and take it public, usually within two years.

A few high-profile deals were also wiped out given the unfavorable market conditions, including SeatGeek’s $1.3 billion deal with Billy Beane’s RedBall Acquisition Corp.

— CNBC’s Gina Francolla contributed to the coverage. SPACs wipe out half their value as investors lose appetite for risky growth stocks

Drew Weisholtz

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