Tag Archives: SPACs

The Collapse of the EV SPACs: Retail Investors Got Fleeced Swiftly and Spectacularly, by Wolf Richter

Posted on February 13, 2022 | 1 comment

In every bear market former high-flyers return to earth, sometimes all the way to earth, as in zero. From Wolf Richter at wolfstreet.com:

Four stocks collapsed by over 90% from highs. Others not far behind. SPAC-hype-boom leaves trail of SEC & DOJ investigations and class-action lawsuits.

The SPAC hype-boom that started taking off in 2020, along with a whole bunch of other ridiculous wealth-transfer schemes, has been imploding more broadly, not limited to EV SPACs. These Special Purpose Acquisition Companies raised tons of money, often involving celebrities that hyped this crap in the social media so that the dumbest retail investors would swallow it hook, line, and sinker. After the SPAC started trading publicly, they bought startups at huge valuations. The merger caused the start-up to be the publicly traded company. Insiders made a killing in this process no matter what happened.

This scheme of going public via SPAC dodges many of the disclosure requirements and other requirements that classic IPOs are subject to. Soon, a number of these companies were being investigated by the SEC and the Department of Justice.  And the fleecing of retail investors has been swift and spectacular.

All of the nine EV makers and EV-battery makers featured here are losing enormous amounts of money. All of them compete with the hugest companies out there: global auto, truck, and battery makers. The shares of four of them have collapsed by over 90% from their highs. The one that collapsed by the least was still down 60%. Some of them will likely go to $0.

EV SPACs & IPOs Price $ % from peak Date of peak
Nikola [NKLA] 7.79 -90.3% 9-Jun-20
Lordstown [RIDE] 3.04 -90.4% 11-Feb-21
Romeo Power [RMO] 2.06 -93.9% 24-Dec-20
Workhorse [WKHS] 3.23 -92.5% 4-Feb-21
Quantum [QS] 15.87 -88.0% 22-Dec-20
Faraday Future [FFIE] 4.59 -77.9% 1-Feb-21
Canoo [GOEV] 5.85 -73.9% 7-Dec-20
Rivian [RIVN] 58.85 -67.2% 16-Nov-21
Lucid Motors [LCID] 25.84

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SPACs Are Lining Up as the Next WTF Chart of the Year , by Wolf Richter

Posted on March 17, 2021 | Leave a comment

With SPACS (Special Purpose Acquisition Companies) you invest first and find out what you’re investing in later. If this seems strange and perverse, it is because it is, a phenomenon one only sees at the tippy-top of long running bull markets. From Wolf Richter at wolfstreet.com:

Who’s going to be the sucker? Even the SEC, which has been asleep through all this, warns retail investors. But in the current mega-bubble craze, no one gives a hoot about anything anymore.

SPACs – Special Purpose Acquisition Companies, or more descriptively, “blank check companies” that have no operations – have accomplished a huge feat that fits seamlessly into the current mega-bubble craze.

So far this year, as of today, 260 SPACs went public and raised $84 billion with their IPOs, according to data provided by SPACInsider. This is a big moment because it exceeded the total amount raised during the entire year 2020 of $83 billion, which itself had been six times as large as the prior full-year record in 2019. At this pace, SPACs are forming the next WTF chart of the year:

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With 5 New SPAC Pricing Every Single Day, Matt Taibbi Slams The Latest “Get-Super-Rich-Quick” Scheme, by Tyler Durden

Posted on February 23, 2021 | Leave a comment

A Special Purpose Acquisition Company is a company that’s solely set up to buy another company or companies. Yes, it’s as wacky as it sounds. From Tyler Durden at zerohedge.com:

One of the remarkable stories of 2020 – and even more so 2021 – one which has sparked many comparisons to 2007 just before the credit/housing bubble popped, has been the record surge of blank-check, or SPAC, issuance where investors – at a loss what to invest in – hand their money to a marquee investor who promises to find an appropriate investment over a given period of time or refund the money.

We first discussed the threat of the SPAC bubble back in December, around the time some wondered if the good times may be ending: in an interview with Bloomberg last month, Olympia McNerney, Goldman’s head of U.S. special purpose acquisition companies, described the U.S. SPAC market as being “perhaps too frenzied” and predicted volumes will become more “rational: as fund managers deal with what she described as indigestion.

In retrospect, the good times were only getting started. As Goldman’s Ben Snider wrote over the weekend, so far in 2021, 144 SPACs have gone public — averaging roughly five per trading day — raising a total of $44 billion. Just seven weeks into the year, this represents more than half the totals in 2020, which itself witnessed a 5x increase in SPAC activity relative to 2019. The good news is that unlike historically, when SPACs tended to underperform the market, the median of the 15 most popular SPACs has returned 8% YTD, with some generating much stronger returns and only one delivering a modestly negative YTD return.

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