Newscasts - BVTV: Cashing blank checks
27/08/2024 20:49
Click the following link to watch video: https://share.newscasts.refinitiv.com/link?entryId=1_fmtwbbo1&referenceId=1_fmtwbbo1&pageId=Newscasts Source: 'Reuters - Business videos' Description: The mania for special-purpose acquisition companies may be over, but they still represent 25% of US IPOs this year. Related deals are also keeping Wall Street fees flowing. Some tweaks to the formula might help SPACs in finding willing merger partners. Jeffrey Goldfarb explains. Short Link: https://refini.tv/46ZOdsN Video Transcript: Blank checks are a gift they keep giving on Wall Street. Shell companies stuffed with cash and designed to usher private firms onto public stock exchange are no longer the mania they used to be. In 2021 alone, about 700 of these so-called special purpose acquisition companies made a market debut, raising $165 billion in the process. Although there are fewer of them now, they have accounted for a quarter of all US IPO this year, ensuring a steady drip of fees for investment bankers. There are also still about a hundred of these shell companies hunting for deals. Others that completed mergers earlier, such as Asia Real estate portal PropertyGuru, are now increasingly being acquired themselves, adding yet another stream of fees for financiers in an otherwise sluggish deal market. New rules have helped slow down the activity. One recent change imposed by the SEC prevents the overly optimistic projections that became common in SPAC’s, some of which went bankrupt post takeover, including WeWork, Richard Branson's Virgin Orbit and electric carmaker Fisker. One problem is that many investors are not even hoping for a deal. Hedge funds and others are mainly interested in borrowing against the safely held cash they inject into a SPAC and getting the yield and then vote against any transaction or just ask for their money back. This ambiguity makes it harder to buy steadier businesses like ones owned by private equity firms. By one estimate buyout shop, such as Blackstone and KKR are sitting on a collective $3 trillion worth of companies, many of which they're eager to sell. Redesign SPAC structures would provide them a useful exit rail. For example, in Britain, shell company shareholders don't get to vote on an acquisition, the decision is left to the board instead. For Wall Street to keep cash and blank checks might require private equity to get some help from Washington to write them