Just weeks ago, SPAC’s were the flavor of the month for NBA players, celebrities and other professional sports stars. The “Special Purpose Acquisition Companies” were all the rage on Wall Street as they helped take companies public daily.
Just in March, there were 109 SPAC deals done, and after the first quarter of 2021 there were more SPAC deals completed than all of 2020.
That was then, this is now. April has seen a 90% drop-off in SPAC deals, with just 10 recorded so far, and it will be slower in May experts say.
Why has the fad faded? The SEC issues accounting guidance that would classify SPAC warrants as liabilities instead of equity instruments. If a law is passed, a CNBC report says the companies that went public through a SPAC would have to recalculate their financials in 10-K’s and 10-Q’s for the value of warrants each of the quarters the company was public.
Translation? A very expensive pain in the butt.
Anthony DeCandido, a partner with RSM LLP told CNBC it’s one of a CFO’s worst nightmares.
“In the accounting world, that is one of the biggest challenges you can face is if you have completed work and then you have to go back and do it because it just shows poorly to the outside and evokes the level of public trust you really want. It just further scrutinizes what’s already been a very misunderstood exit plan in SPACs.”
Big banks and investment firms on Wall Street have been saying that retail investors are quickly backing away from SPAC buying.
There is one SPAC taking a company public Wednesday. dMY Tech is behind Genius, a sports betting company. By the way, dMY Tech saw their stock drop 11% on Tuesday.
What does all this mean for Shaquille O’Neal, Stephen Curry, Serena Williams, Colin Kaepernick, Alex Rodriguez and others who had jumped on the SPAC train this year? They may have to stick to their day job.
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