A SPAC Might Make Sense Now If Not for the Carnage
The market dynamics exist for blank-check companies, but private businesses and investors are skeptical after the excess of the last few years.
Martin Franklin is trying a new SPAC structure.
Photographer: Demetrius Freeman/Bloomberg
Remember when SPACs were the solution to a problem? It was 2020, and a lot of companies wanted to go public, but an initial public offering takes time and a lot of paperwork. Blank-check companies, on the other hand, were tailor-made to fast-track a company to public investors. Obviously, things didn’t work out. Bad companies were taken public by even worse promoters at valuations that seemed outrageous then and tragic today.
Yet as unscrupulous as many of their promoters were, SPACs were also a victim of timing. Their collapse occurred at a time of historically cheap debt, wide-open IPO markets and competitive takeover auctions. Private companies had many options, a fact reflected in just how awful many of the ones that went the SPAC route were — taxis that flew, space rockets that didn’t and a lottery runner that came up empty, among them.