SPACs' Prognosis 📉

SPACs were all the rage in 2020. Like COVID, they spread like wildfire, from Silicon Valley to New York. But the same high-growth companies that nabbed headlines and major valuations when they went public are now seeing stock prices plummet and operating losses accelerate.

The Wall Street Journal recently reported that shares of companies that listed via SPAC in 2021 are down nearly 60% overall. The electric scooter company Helbiz found a willing SPAC partner based on its "clear path to profitability” but still ended up with a $72MM loss.

That kind of unmerited rosy picture has made SPACs a target of SEC attention. The regulatory body wants more oversight into how much fantastical projecting companies can do when listing via SPAC, in order to avoid these very glaring pitfalls. Elizabeth Warren, the vocal consumer advocate and legislator, just introduced a proposal to regulate SPACs even further than the proposed SEC rules.

Amidst all this bad press, Forbes magazine did what any reasonable press entity would do, and backed out of its announced merger with a Hong Kong-based blank check company at a $630MM valuation.

For now, these companies might consider the same business advice given by startup accelerator, Y Combinator. It's never too late to pursue profitability.