SeatGeek and Forbes Nix SPAC Deals During Market Pullback

Ticketing platform SeatGeek and media outlet Forbes ended their merger with blank check companies on Wednesday, underscoring the challenges of taking companies public during the year’s stock market turmoil. now.

SeatGeek and Forbes became the latest companies to end their association with special purpose acquisitions, or SPACs, after many investors grew bored with the once-hot alternative. for traditional initial public offerings. With interest rates rising and equities soaring, many companies are deciding to raise private capital rather than pursue a public listing, which skyrocketed to record levels last year.

Other companies hitting SPAC deals in recent months include savings and investment app Acorns Grow Inc; Fertitta Entertainment Inc. of billionaire Tilman Fertitta, the holding company that owns the Golden Nugget casinos and restaurants of Landry; and drug development technology company Valo Health LLC. According to Dealogic, more than 35 SPAC mergers have been postponed since the beginning of November, topping the total of the previous four years combined.

One reason the SPAC market was particularly hit hard during the market sell-off is that investors can pull their money out of completed mergers before the deals go through. . They are encouraged to withdraw when the stock price is low because they can often get their original investment back or even make a small profit by doing so while eliminating the possibility of a loss on the trade. .

Withdrawals, known as buybacks, have skyrocketed recently, prompting companies to complete transactions with much less cash and in many cases putting pressure on their stock prices. .

“It’s going to be very difficult to get a lot of deals done,” said Patrick Galley, an SPAC investor and managing director of RiverNorth Capital Management.

Renowned baseball CEO Billy Beane is a supporter of RedBall Acquisition Corp., the SPAC that previously agreed to merge with SeatGeek.


Masterpress/Getty Images

The business challenges for companies listed in this way are also plaguing SPAC creators, who often have two years to complete a deal before they have to pay investors back. and it took them several million dollars to set up the SPAC. According to research firm Audit Analytics, at least 25 companies that merge with SPAC between 2020 and 2021 have issued so-called ongoing issue concern warnings in recent months, meaning there’s “suspicion.” significant doubt” about their viability next year.

Also known as a check company, SPAC is a shell company that raises money and is listed on a stock exchange for the purpose of merging with a private company to take it public. Once a deal is announced and regulators approve it, the company will list SPAC replacement shares on the stock exchange.

For much of 2020 and 2021, the shares of startups associated with SPACs have skyrocketed, allowing companies to raise large amounts of cash and enriching SPAC creators who receive get lucrative offers on completion of transactions and on average several times their initial investment.

But when the market reversed last summer, the math underpinning many mergers fell apart.

In addition, regulators have increased market scrutiny and are expected by many startups to list shares in this way, adding to the pressure. Analysts now expect many of the nearly 600 SPACs seeking to merge to fail and return investors’ money. The founders of this white check company are expected to face total losses of up to $1 billion by the middle of next year.

SeatGeek previously agreed to merge with RedBall Acquisition Corp.

, a SPAC that includes prominent baseball executive Billy Beane among its backers, in a deal that values ​​the event ticketing platform at around $1.35 billion, including debt. SeatGeek cited the challenging market for fast-growing companies on Wednesday when it announced that the deal has closed.

RedBall SPAC also previously discussed a merger with Boston Red Sox owner John Henry’s Fenway Sports Group LLC, but the two parties never reached an agreement.

Business media magazine Forbes on Wednesday concluded a merger agreement with SPAC Magnum Opus Acquisition Ltd.

SPACs were also in the news this week because Democratic Sen. Elizabeth Warren said she would introduce a bill that would tighten regulations and suppress incentives received by creators of blank-checking companies. upon completion of the transaction, citing reports in The Wall Street Journal and other media outlets. The Securities and Exchange Commission, Wall Street’s top regulator, recently proposed new disclosure rules for SPACs.

Private companies are flooding into special purpose acquisitions, or SPACs, to bypass the traditional IPO process and go public. The WSJ explains why some critics say investing in these so-called short-testing companies isn’t worth the risk. Illustration: Zoë Soriano / WSJ

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