The once red-hot SPAC market continues to be touch and go, at best.
Third quarter to-date, an average of six SPAC [special purpose acquisition company] IPOs have raised $1.2 billion in total capital each week, according to fresh data out of Goldman Sachs on Thursday. That pace is down sharply from the boom period seen in the first quarter, when an average of 21 SPACs raising $6 billion in capital came to market each week.
Goldman points to increased regulatory concerns — in part fueled by high-profile blowups of speculative electric vehicle players Lordstown and Nikola that used a SPAC structure to go public — as a reason for the ongoing pressure.
"Regulatory and legal concerns continue to cloud the issuance outlook," said David Kostin, Goldman's chief U.S. equity strategist.
Not helping sentiment on SPACs is poor market responses upon deals closing.
Since a February peak, an ETF of SPACs across stages of the lifecycle has plunged 35%, compared to a 14% gain for the S&P 500, notes Kostin. Of the 172 SPACs that have closed deals since the beginning of 2020, the median has outperformed the Russell 3000 from its IPO to deal announcement. But, Kostin says, in the six months after the deal closure the media SPAC underperformed the Russell 3000 by a whopping 42 percentage points.
That said, not everyone is down on the SPAC market.
Battery swapping outfit Gogoro — which sells batteries to be used in electric vehicles in emerging markets — revealed Thursday it will go public via a SPAC on the Nasdaq by the end of the first quarter of 2022. The deal values Gogoro at $2.35 billion.
Gogoro founder Horace Luke told Yahoo Finance Live his company is EBITDA profitable (unlike other SPACs) and using a SPAC structure made sense.
"A company like ours with good fundamentals and a good strong future really stand out," Luke said.