PSPC Collapse: “Blank Check” Inventories Diminish Following SEC Investigation Reports | Business and economic news
The reason PSPCs are called “blank check” corporations is that they generally do not have a merger goal when they are formed.
Blank check stocks have plummeted on a report that US regulators are scrutinizing one of the hottest corners of the stock market.
The IPOX SPAC index, which tracks special purpose acquisition companies, extended its sale to an eighth consecutive day. The index is still up 45% since the end of July, against a gain of 20% for the S&P 500 index. Pershing Square Tontine Holdings of Bill Ackman has sunk as much as 6.1%. Social Capital Hedosophia, the partnership between serial traders Chamath Palihapitiya and Ian Osborne, slipped more than 8% earlier on Thursday.
Big business officials are awaiting letters from the U.S. Securities and Exchange Commission, asking questions about the potential dangers of underwriting a deluge of transactions from PSPCs, according to two people familiar with the matter. For now, the investigation appears to be primarily an investigation, but it could turn into something more formal depending on what regulators find out, one of the people said. Reuters previously reported the SEC’s investigations into the industry.
Regulators may be stepping up their scrutiny of these companies after a frenzy that has drawn celebrities such as Shaquille O’Neal, Colin Kaepernick and Alex Rodriguez, as well as a who’s who of the Wall Street titans. In the past 12 months, more than 700 PSPCs have flocked to the New York stock exchanges, seeking to raise around $ 227 billion, according to data compiled by Bloomberg.
“There have been too many new listings and the market just can’t handle the spillover,” said Christopher Matthaei, partner at Elevation Securities, who conducts research on SPAC.
PSPCs are businesses that raise money to buy businesses. The reason they are known as a blank check is that they usually do not have a merge target when formed. It is as if the investors are giving the sponsor a blank check to use.
The first recorded list of a blank check company dated back to 1993, according to Bloomberg data.