With a desolate market, the SPAC IPOs close in 2022

The global market for Initial Public Offerings (IPOs) of Special Purpose Acquisition Companies (SPACs) barely recorded 86 placements for a total financed amount of 13,392 million dollars in 2022.

For this new year they will face challenges such as the new rules by the United States Securities and Exchange Commission (SEC), a new share repurchase tax and the expiration of the majority, for which they will have to announce an acquisition in the next six months or they will be liquid.

The drop in issuances in 2022 was 86% compared to the number of offers and 91.76% compared to the capital raised in 2021, according to data from SPAC Data.

In 2021, 613 IPOs were registered for 162.503 million dollars and 2020 closed with 248 offers for 83.386 million dollars.

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The figures show that the debauchery seen in the previous two years, in which critical moments were experienced due to the crisis due to the Covid-19 health emergency, ended up slowing down.

This also coincides with the drop in IPOs in the global stock market, with only 1,333 companies going public, for a combined amount of 179.5 billion dollars, equivalent to a 45% drop in placements and a reduction in income. 61% year-on-year.

The adverse market conditions influenced the cooling, due to the increases in the interest rate, although the regulatory changes also weighed, according to specialists.

“The dramatic decline in SPAC placements coincided with rising interest rates, as investors lost their appetite for risk and regulators set their sights on this market,” specialists from S&P Global Market Intelligence said in an analysis. .

new rules

The SEC is imposing new rules for SPACs, which will increase disclosure and financial statement requirements.

“The SPACs must disclose the functions, responsibilities and experience of the sponsors, the amount and nature of their compensation and any conflict of interest. The information would have to include the risks of the investment and benefits for investors and public shareholders”, they indicated. specialists from the Concord Law School, Purdue University.

In addition, the regulator seeks SPAC transactions to be treated more like IPOs, limiting some of the benefits for the acquired entity.

Added to this is the fact that the United States Department of the Treasury established rules to collect a new tax on the repurchase of shares for 1%, which begins to apply as of January 2023. This includes the application of the payment especially to spin-offs and liquidations of these financial instruments.

Another challenge for this market is that most of the SPACs listed on the Stock Exchange since 2020 are running out of time to acquire a company or liquidate their investors; They will have until mid-2023.

“There is still too much SPAC to announce or complete an acquisition or face a liquidation due to expiration in the next six months. An increase in redemption, regulatory scrutiny and tighter market liquidity coupled with underperforming share prices have dampened investor expectations,” said Paul Go, Global IPO leader at consultancy EY.

He explained that more than 80% or 390 of the 480 SPACs seeking M&A targets are due by mid-2023, while 60 were liquidated in 2022, due to challenging market conditions and before the new excise tax came into effect. vigor.

Spacs will continue to take their place on the equity capital market landscape, but until then they will have to continue to navigate choppy market conditions while awaiting final approval of SEC rules,” said Paul Go.

In Mexico this market was also deserted; in fact, it completed another year without SPAC emissions.

Since its launch, in 2017 only two companies have debuted under this figure on the Mexican Stock Exchange. One is Vista Oil & Gas and the other is Promecap. The latter merged with Grupo Acosta Verde, a developer of shopping centers.

judith.santiago@eleconomista.mx