Of Course They Did

It turns out that before the SPAC mania went bust, as is to be expected for a financial instrument whose primary purpose is to avoid regulatory scrutiny, insiders sold out for huge profits.

To paraphrase Marvin the Martian, "I’m not angry. Just terribly, terribly disappointed."

The SPAC boom cost investors billions. Insiders in the companies that went public were on the other side of the trade.

Executives and early investors in companies that went public via special-purpose acquisition companies sold shares worth $22 billion through well-timed trades, profiting before share prices collapsed.

Some of the biggest winners were Detroit Pistons owner Tom Gores’s investment firm Platinum Equity, British billionaire Richard Branson and convicted Nikola founder Trevor Milton. They were among many insiders who got shares on the cheap and sold them as they rose in value, according to a Wall Street Journal analysis of insider-trading disclosures associated with more than 200 companies that did SPAC deals.

Companies that went public this way have lost more than $100 billion in market value. At least 12 have filed for bankruptcy and more than 100 are running low on cash, battered by higher interest rates and rising costs.

Many executives claimed during the boom that SPAC mergers were a better way for companies to go public than traditional initial public offerings. “It’s easy to understand why executives at the companies went with this option,” said New York University Law School professor Michael Ohlrogge, who studies SPACs. “It wasn’t because it was a better financial technology—it was because it was just better for them.”

Literally, the only benefit to SPACs was that you did not have to go through due diligence for an IPO.

Why regulators allowed this is beyond me, and that there are not criminal prosecutions is a travesty.