Bankruptcy risks are exploding in the ranks of listed companies via a Spac


(BFM Bourse) – The Spac boom has enabled a wide range of companies to enter the stock market directly without having to undergo the cumbersome and complex process of a traditional IPO. But now two years after the start of the craze for these “blank check” investment vehicles, alerts on their continuity of operation are multiplying.

Shebam, pow, blop, wizz… Spac and pschitt? Over the past two years, investors have become familiar with these companies whose name sounds like an onomatopoeia worthy of Serge Gainsbourg’s song, “Comic Strip”. Everyone has thus learned that Spac designates a Special Purpose Acquisition Company – in short, a way of raising funds in advance through a listed company without operational activity with minimal formalism, exclusively intended to acquire one or more companies generally in a sector fashionable. But oh surprise, these investments do not always keep their promises. A growing number of start-ups having de facto listed after merger-absorption by a Spac are now forced to signal to the market… that they are not certain of making it through the year.

According to data compiled by Audit Analytics, cited by the wall street journal, at least 25 companies resulting from a merger with a Spac have reported a threat to their business continuity in recent months. Remember that when the auditor of a listed company expresses doubts about its ability to stay financially afloat over the next twelve months, it is required to immediately inform the market.

Audit Analytics identified 232 newcomers to the stock market via a Spac at the same time, the rate of warning on business continuity therefore exceeds 10% among this contingent, i.e. double what is observed among companies entering Exchange via a proper IPO.

Funds raised that have evaporated

Admittedly, all the firms that activate the warnings at the accounting level do not go bankrupt (statistically most even survive a year or more), and conversely many companies go bankrupt without having raised the alarm signal beforehand. But the proliferation of these warnings contrasts with the lavish prospects mentioned shortly before.

Among the companies that are more certain of being able to continue their activity in the short term is notably View Inc. (ex-eChromics, ex-Soladigm) which produces a coating applied to the windows making it possible to conceal the luminosity according to the external sunshine. The Spac “CF Finance Acquisition Corp II” (the custom is to adopt a name to sleep outside for the Spac, then to take the name of the company acquired afterwards) had absorbed it in 2021 by bringing it 815 million dollars new money, the company then ensuring that it would achieve profitability before needing to raise more. In fact, those funds have apparently melted away and View has not reported results since May 2021, now under threat of delisting by the Nasdaq operator. The company has promised to publish its updated and restated accounts on May 31 but has already warned that they would mention that it does not have the resources for the next 12 months.

The WSJ also cites the scooter, bicycle and electric scooter rental company Helbiz, which entered the stock market via its takeover by “GreenVision Acquisition Corp” (same remark as above). The company’s latest publications mention a risk to its continuity of operation, while it had assured investors at the start of 2021 that it had solid prospects for profitability over the year. The year ended with a net loss of $72 million.

Guillaume Bayre – ©2022 BFM Bourse



Source link -84