By:  Robert Verdugo, CMFC®, APMA®, Financial Analyst

What a difference a year makes. Last spring, you couldn’t avoid the topic SPACs (Special Purpose Acquisition Companies) in any financial publication you laid your eyes on. Now the SPAC conversation is still prevalent, but for opposite reasons. Investor sentiment has dissipated dramatically in recent months as the prospect of higher inflation and the expected rise in the Federal Funds rate seemingly turned a once booming investment strategy on its head. The SPAC Index, pictured below, recently reached fresh 52-week lows.

According to Bailey Lipschultz, with Bloomberg News, “At least six mergers with special-purpose acquisition companies have been canceled this year, on pace for a record number of nixed deals in a single quarter. At least 22 have been spiked since the middle of 2021, according to data compiled by Chicago-based SPAC Research, which tracks the industry. That compares with 26 tie-ups that were called off in the more than five years prior, the data show.”¹

The post pandemic market has given us many surprises, but bubbles still burst just the same. As Edwin Lefevre once said “The big money in booms is always made first by the public – on paper. And it remains on paper”.²

Sources:

1. https://www.bloomberg.com/news/articles/2022-02-14/spac-mergers-are-falling-apart-at-rapid-pace-in-sign-of-fatigue
2. “Reminiscences of a Stock Operator”. Book by Edwin Lefèvre. Chapter XXI, p. 257, 1923.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.