Special purpose acquisition companies (SPACs) have seen a rout wipe out much of their value after looking promising earlier in the year, The Wall Street Journal (WSJ) reported Thursday (Sept. 2).
Over six months since SPACs were at their highest crest, a big selloff has reportedly cut down the valuation of the companies that went public that way by $75 billion, according to the report, which cited a Dow Jones analysis.
There were 137 SPACs that had closed mergers as of February which have now lost 25% of their combined value. The pullback at one point was over $100 billion, the report stated.
That analysis didn’t include companies that had not closed mergers by mid-February or those which are no longer trading, according to the report.
While SPAC declines have been steep for companies working in the fields of green energy and sustainability, the damage has been done over a wide range of companies in general, the report stated. Also, around 75% of the SPACs that have announced but not yet completed their deals are now trading below their listing price — a shift from earlier in the year when the sector was close to the hottest thing in finance, and SPACs almost always rose above those prices following the announcement of a deal.
But now, by contrast, some SPACs like the one focused on taking Vertical Aerospace Group public, are seeing their shares fall instead, according to the report.
The value of the SPAC market is still sitting at $250 billion or so, an increase from $100 billion just a year ago. However, late arrivers to the scene have seen their investments boomerang, which shows the risk of the sector, the report stated.
In other SPAC-related news, however, Offerpad, a residential real estate platform, has completed its deal with a SPAC in order to go public.
Read more: Offerpad to Start Trading After SPAC Merger
Offerpad’s specialty lies in faster buying and selling of homes. Homeowners using it have the ability to get a free 24-hour cash offer, among other things.