The once Red-hot SPAC market continues to be touch and go, at best.
Third quarter to-date, an average of six fresh company IPOs that raised $1.2 billion in total capital each week, according to Goldman Sachs data released on Thursday. That pace is down sharply from the boom period seen in the first quarter, when an average of 21 SPACs raised six billion dollars in capital every week.
Goldman points to an increasing regulatory concern — in part fueled by high-profile blowups of speculative electric vehicle players Lordstown and Nikola that made use of a SPAC structure to go public — as the reason for the ongoing pressure.
Regulatory and legal concerns continue to cloud the issuance outlook, said David Kostin, Goldman Chief U.S. Equity strategist.
In terms of poor sentiment on SPACs, there are no easy solutions.
Since a February peak, an ETF of SPACs across stages of the lifecycle has plunged 35%, compared with a 14% gain for the S&P 500, notes Kostin. Of the 172 SPACs that closed deals since the beginning of 2020, the median has outperformed Russell 3000 from its IPO to deal announcement. But, Kostin says, the media SPAC underperformed Russell 3000 by a whopping 42 percentage points in the six months following the deal closure.
That said, not everybody is down on the SPAC market.
Battery swapping outfit Gogoro, which sells battery to be used in emerging markets in electric vehicles, announced Thursday that it will go public via a Share Pane on Nasdaq by the end of the 1st quarter 2022. The deal also values Gogoro at $2.35 billion.
Yahoo Finance Live founder Horace Luke said that his company is EBITDA profitable unlike other SPACs and using a SPAC structure made sense.
A company like ours with good fundamentals and a good strong future really stand out, Luke said.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter and LinkedIn.