The Strategist

WSJ: SPACs are liquidating in December at record rate

12/27/2022 - 08:57

According to The Wall Street Journal, the SPAC (special purpose acquisition companies) merger market, which experienced an early-year boom, will enter a phase of mass liquidation by year's end.

© 2018 Advantus Media, Inc.
© 2018 Advantus Media, Inc.
Four SPACs are liquidated each day this month, the same number as when this way of going public was most well-liked by businesspeople.

Special-purpose mergers and acquisitions corporations (SPACs) are established to take over a private company and list it on the stock exchange. Investors in SPACs often give the company's leaders two years to find a possible acquisition partner. If it doesn't, the business must either pay its investors more money or go out of business.

About 70 SPACs have announced liquidation and investor reimbursement since the start of December, according to SPAC Research. The "shell companies" founders lost around $600 million in December, and losses since the year's commencement are thought to have totaled $1.1 billion.

Additionally, experts predict that the SPAC industry will keep declining in the near future. According to the WSJ, SPAC owners found it considerably harder to locate a partner for a merger as a result of the collapse of the stock markets and the increase in interest rates. Analysts expect that SPAC shareholders will lose $2 billion in the upcoming months.