Wave of Spac deals cancelled amid stock market turmoil

Unpredictability in equity markets has called off planned mergers

Traders at the New York Stock Exchange on Friday. A flurry of blank-cheque mergers were called off over the past 24 hours. AP
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A flurry of blank-cheque mergers were called off during the past 24 hours as target companies and Spac sponsors dealt with market turmoil that has shaken the industry and capital markets.

At least four special-purpose acquisition company (Spac) tie-ups have been called off since the end of Thursday’s trading, bringing the year’s total to 30 break-ups.

The malaise is expected to keep Panera Brands, the owner of Panera Bread and Einstein Bagels, and online brokerage eToro private.

With just over half the year gone, Spacs and the companies that went public by merging with them have fizzled amid one of the stock market’s worst routs in decades that has been particularly cruel to riskier stocks.

The De-Spac Index, a basket of companies that completed their tie-ups, has crashed 67 per cent and more than 700 Spacs are either on the hunt for deals or racing the clock to close ahead of deadlines.

Panera’s cancelled deal leaves restaurateur Danny Meyer’s USHG Acquisition with about eight months to find and close a merger before a deadline.

The broken deal between Betsy Cohen’s FinTech Acquisition V and eToro, according to The Information, would give the Spac until December to merge with a partner and mark the second canned SPAC tie-up for one of the industry’s most well-known sponsors.

Spacs are known as blank cheques because they raise money through a public offering with the goal of buying a private business. They have limited time to complete a deal, typically about two years.

If they don’t meet that deadline, the company must return the cash to shareholders, though they can buy a short extension by giving holders more cash.

Industry uncertainty and a backlog of deal-needy Spacs have driven at least eight sponsors to close shop and return cash to investors this year.

The glut of teams on the hunt and unpredictability hanging over the equity markets have pushed dealmakers to withdraw and quietly abandon planned Spacs that would have raised roughly $30 billion so far this year, according to data compiled by Bloomberg.

Updated: July 02, 2022, 4:54 AM