In an article for Reuters Breakingviews, Lisa Silverman breaks down six key risks for SPAC investors and solutions to mitigate them.
Special purpose acquisition companies—or SPACs—are having a moment. The investment vehicles raised $83.4 billion in the first quarter, more than all of 2020, and almost three times the amount traditional initial public offerings raised during the same period. Hailing several high-profile sponsors, including tennis great Serena Williams, basketball star Stephen Curry, and hedge fund giants like Pershing Square, they have wedged their way into Wall Street vernacular quickly and heavily.
However, lack of oversight and scrutiny creates opportunity for fraud and heightened risk for investors. Long-term sustainability of the SPAC market will rely on creating a comprehensive risk management framework—and clear regulatory guidelines—with stronger controls and safeguards, that ensure companies going public via SPACs have the same scrutiny as companies going public via traditional IPO. Until that happens, SPAC investors face six main risks, outlined in this article.
Read the full article in Reuters Breakingviews (registration may be required).