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What's the track record of blank check companies after they acquire?


muscleman
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What's the track record of blank check companies after they acquire?

It seems to me that they have the incentive to make the acquisition happen, which means tendency to over paid and may also raise a lot of debt.

Do you know any SPACs that have done very well? How about the statistics in general?

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Off the top of my head, as of a few years ago something like 70% lost money after the first year and 85%+ over a longer period of time I forget. Some of the ones that worked from recollection would be Tile Shop(now in the bust category though), Del Taco, Twinkies(Hostess), AYR(although this is still early). Easier to just be an IPO investor, cash out, and play the free warrants.

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Guest Schwab711

https://economics.sas.upenn.edu/sites/default/files/filevault/13-013.pdf

 

https://www.econstor.eu/bitstream/10419/177392/1/2017-02-12%20SPAC%20IPOs%20Chapter%20SSRN.pdf

 

Really bad:

 

Howe and O’Brien (2012) discuss how the structure of ownership and corporate

governance characteristics impact both short and long term performances of SPACs. They

construct a sample of 158 SPACs for the period 2003-2008 and report positive performance in the

range of 2% to 3% for SPACs in the short term. However, for long term performance, the average

half year return is equals to -14%, average one year return is -33% and average three years return

is -54%. They state that board independence and the structure of ownership do not affect returns.

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Imagine this, you convince a bunch of Wall Street people to give you $100mm to $1 billion.  Then you have a gun to your head to make an acquisition in 24 months.  The guys who are selling to you can either go public via a properly road showed IPO or through this back door way and have to deal with warrant overhang.  If you are a legit company, what path would you take?  This is the problem that I have Social Capital.  Chamath Palihapitiya talked about how the IPO process is dead and the pricing mechanism is antiquated.  I was look forward to a "crypto or new age way of doing business."  So what's the solution?  SPAC!!!!

 

This space is just full of crap. 

 

Crumbs cupcake - Bankrupt

Jamba Juice -

Hill International

 

Just google some of these names and you'll see lots of dead or badly injured bodies in the way

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