(BFM Bourse) – Two years after the start of the Spac craze, the weather is turning stormy… Chilled by adverse market conditions, Forbes in turn gives up going public via these vehicles investment “blank checks.” The century-old American press group known for its rankings has not indicated how it intends to finance its development plan, the main motivation for its plan to go public.
The American press group Forbes, specializing in economic information, indicated on Wednesday that it was giving up going public via the merger with an already listed vehicle, a Spac, illustrating the fall in popularity of this listing process which was all the rage. until last year.
Forbes did not specify the reasons for this renunciation, contenting itself with insisting on the health of the group, which recorded growth of 11% last year and expects 12% this year. The operation, initially announced at the end of August 2021, was to enable Forbes to raise around $600 million, through Spac (Special Purpose Acquisition Company) Magnum Opus Acquisition Limited, which went public in March 2021.
The Spac is a listed vehicle whose sole purpose is to raise funds and merge with a company wishing to go public. This process is considerably less constraining than a classic IPO, particularly from a regulatory point of view. Created almost 30 years ago, the Spac concept has seen a resurgence in popularity in 2020 and 2021, fueled by the surge in stock markets. Many celebrities, such as rapper Jay-Z, basketball legend Shaquille O’Neal or former US President Donald Trump, have associated their names with these companies.
Less attractive Spacs with rising rates?
With the rise in interest rates, the tightening of credit conditions and Wall Street’s very poor start to the year, their star has nevertheless clearly faded for several months. Investors are also worried about tougher regulations, which would make them less attractive. In March, the American market regulator, the SEC, unveiled a series of new rules that will impose more transparency on Spacs, whose opacity has often been criticized.
In announcing the cancellation of its merger with a Spac, Forbes did not indicate how it intended to finance its development plan, which was at the origin of its project to go public. Still on Wednesday, the SeatGeek show ticket booking site also announced that its merger with the Spac RedBall Acquisition would ultimately not take place. The group initially hoped to raise $675 million through this merger. The two parties said they had withdrawn “due to the current unfavorable market conditions, which particularly affect technology companies”.
The future of the sector remains uncertain. According to research firm Audit Analytics, nearly 11% of companies acquired by SPACs between January 2020 and December 2021 have issued bankruptcy warnings in recent months. A total disappearance of these financial tools is however unlikely, according to Mr. Stegemoller.
“I think the market will shrink in the short term, it will be less dominant in the field of IPOs”, predicts the academic. “Honestly, it’s probably a good thing,” he says, betting on fewer but better regulated Spacs, and therefore less dangerous for investors.
According to Dealogic, only 67 Spacs were listed on the New York market between January and May, compared to a total of 861 over the previous two years. And over the first five months of the year, 49 mergers with Spac were recorded, a slower annual rate than in 2021 when there were 231…
Sabrina Sadgui with AFP
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