Internet service provider Starry Group Holdings Inc. on Feb. 20 became the latest to seek protection from creditors, bringing the count of failed SPAC offspring to at least eight since June 2022. The trend is likely to be just getting started. Almost 100 companies that listed this way don’t have enough money on hand to fund their current level of spending over the next year, data compiled by Bloomberg show. That’s on top of the 73 companies that currently trade below $1 a share, risking a potential delisting from major exchanges such as the New York Stock Exchange and Nasdaq. Since the baseline share price of most SPACs before a merger is $10, a price below $1 also means that an investor who bought into the shell company in anticipation of a deal and held on for the full ride lost at least 90%.
“The value destruction has been spectacular,” says Dan Zwirn, co-founder of Arena Investors LP, a debt-focused investment firm. The way Zwirn sees it, troubled SPACs are usually one of two types: totally speculative businesses or reasonable ones that were grossly overvalued. The former will go bankrupt or be quietly wound down, while the latter can be sold for low prices, he says. So far, at least 12 companies that did SPAC mergers have agreed to buyouts for less than they were worth when they listed, according to data compiled by Bloomberg.
Source: SPAC Era Ends as Companies That IPO’d Struggle – Bloomberg