In recent years, the New York Stock Exchange in particular has experienced a real SPAC boom. Hundreds of such empty company shells had collected billions from investors and had gone public. The goal: to merge with a company and thus bring it to the stock market – without a complex IPO and bypassing the control of the SEC supervisory authority.
This is particularly attractive for young, up-and-coming start-ups, since SPACs are considered a tried and tested means of circumventing the complicated approval procedures for IPOs, especially for young, up-and-coming companies in the USA. But since the US authorities have been trying to regulate the SPAC market more, the boom has died down. Too many SPACs, hundreds of which have floated in the US alone, performed disappointingly in the stock market after being filled with life.
PSTH gives up
Now even the largest listed takeover vehicle in the world has given up: Pershing Square Tontine PSTH has announced that it is no longer looking for an object to buy. PSTH went public on the New York Stock Exchange two years ago – in the middle of the SPAC boom – and had collected four billion dollars, which are now to be paid back to investors.
In a letter, PSTH boss Bill Ackman blamed the failure on unfavorable market conditions and stiff competition from traditional IPOs. "High-quality, profitable growth companies may defer their IPOs until the market environment is more favorable," Ackman wrote to investors. This has limited the group of high-quality transactions, especially in the past twelve months.
Even prominent investors are not helping
Ackman's plans to use the vehicle to take a ten percent stake in Universal Music, which had been spun off from Vivendi, failed due to the veto of the US supervisory authorities. Instead, the billionaire joined Universal with his hedge fund Pershing Square.
Well-known investors such as the hedge fund Baupost, the Canadian pension fund OTPP and the fund company T. Rowe Price had participated in Pershing Square Tontine. For investors, SPACs are initially a risk-free investment because they can return their shares at the issue price before a possible takeover. "There would have been acquisitions that PSTH could have made over the past year, but none of them lived up to our aspirations," Ackman wrote.
Little success in Europe
The SPAC boom only spilled over to Europe in a weakened form; in Frankfurt, for example, only a handful of these companies made it onto the stock exchange. Most of them initially raised $200 to $400 million. If a takeover becomes concrete, they go looking for more money.