When You've Lost Silly-Con Valley

It looks like even the gonifs running Silicon Valley unicorns have decided that special-purpose acquisition companies (SPACs) are too dodgy for them.

I did not think that there was a financial instrument sufficiently duplicitous for the masters of the universe to object.

I was misinformed:

Startup chief executives are turning a cold shoulder to SPACs.

Skeptical CEOs say they are turning down offers from special-purpose acquisition companies, deleting their solicitous emails and tapping the brakes on merger deals amid nosediving shares and disappointed investors.

So-called blank-check companies, which go public with no assets and then merge with private companies, exploded in popularity last year as a mechanism for startups to raise a lot of money with more speed and fewer regulatory hurdles than a traditional initial public offering.

Startup chief executives are turning a cold shoulder to SPACs.

Skeptical CEOs say they are turning down offers from special-purpose acquisition companies, deleting their solicitous emails and tapping the brakes on merger deals amid nosediving shares and disappointed investors.

So-called blank-check companies, which go public with no assets and then merge with private companies, exploded in popularity last year as a mechanism for startups to raise a lot of money with more speed and fewer regulatory hurdles than a traditional initial public offering.

………

Among 44 technology startups that completed a SPAC deal from the start of 2020 through this past April, share prices have on average fallen 12.6%, according to data provided by Minmo Gahng and Jay Ritter, public-stock researchers with the University of Florida. More than half of the tech stocks declined more than 20%. The research is based on the share closing price on May 17.

………

Enthusiasm for SPACs waned after the U.S. Securities and Exchange Commission announced new accounting mandates last month and stepped up scrutiny of other SPAC practices. Another deterrent for startups is mounting litigation from stock traders against SPACs, alleging conflicts of board members, breaches of fiduciary responsibilities and misleading statements, among other things. Some fund managers said they have put a moratorium on new SPAC investments, and one San Diego-based family office, Sky and Ray, said since last year it has slashed its SPAC holdings to five from 104. 

This is the first time in a long time that I've heard of a Wall Street scam falling from favor because the intended pigeons came to their senses before it all collapsed.

It's not the beginning of the end for Wall Street as casino, but perhaps, it is the end of the beginning.

H/T Naked Capitalism