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A no good, very bad year for SPACs

Ten Boston deals lost 42 percent on average.

Ginkgo Bioworks' logo drapes the New York Stock Exchange buildingCourtney Crow/NYSE

The most popular trends on Wall Street rarely work out too well for ordinary investors. So it was in 2021 for the special purpose acquisition company, or SPAC. These blank-check firms raised billions of dollars and offered the cash to startups that wanted to go public more quickly than via a typical IPO.

Some 331 startups agreed to take the money and merge with SPACs last year, according to Dealogic. At least 10 were Boston-area companies.

At the start of 2022, we can tally the damage. From medical robotics company Vicarious Surgical to 3D printing company Markforged to synthetic biology pioneer Ginkgo Bioworks, all 10 deals are trading below the $10 share price paid by the original SPAC investors. How far below? 42 percent on average. Measured from the highest the share prices reached once the deals closed, the drop is even steeper ― 62 percent.


To be fair, the market has soured on all kinds of tech and growth companies on fears of the damage to come from higher interest rates and tighter monetary policy. The Nasdaq Composite Index is down 8 percent from its all-time high back in November and the Renaissance IPO Index, which tracks about 100 recent traditional IPOs, is down 26 percent.

But SPACs have been hit by more than fears of the Fed. They’re under fire from critics who charge that the basic structure let SPAC sponsors profit even when ordinary shareholders got killed. And as analysts and short sellers have discovered, some companies used SPACs to shortcut proper due diligence.

“Except for a few niche situations, they shouldn’t exist,” Stanford professor Michael Klausner tells me. He’s been studying the market for a few years and says he can’t understand why any ordinary investor participates. “I don’t get it.”

Longtime investment banker and now multi-startup board member Paul Deninger sees the other side of the argument. He’s working on a SPAC that’s still looking for a merger partner. Like with the Internet bubble two decades ago, Deninger thinks some of the fallen SPACs, particularly in areas like electric vehicles and climate tech, will ultimately rise again.


“Where investors take more risks than the typical IPO investor to fund world-changing and life-changing ... technologies, I truly believe the SPAC market will provide that for some of these companies in the coming years,” he says.

Meanwhile, there are at least seven SPAC mergers for local companies that have been announced but not yet completed; one announced deal, for Valo Health, was cancelled. Crypto company Circle Internet Finance, weight loss specialist Gelesis, and biotech GreenLight Biosciences had each planned to close by year end but didn’t make it. Circle and Gelesis aren’t saying much, and a GreenLight spokesman says the company is “working towards the end of the SPAC process.”

Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him on Twitter @ampressman.