Former NYSE CEO says boom in SPAC companies has been 'a disaster'
Dick Grasso joined Liz Claman and Charlie Gasparino on 'The Claman Countdown'
Former NYSE CEO Dick Grasso and FOX Business senior correspondent Charlie Gasparino discuss if the SPAC frenzy is dying on 'The Claman Countdown.'
Dick Grasso, former chief executive of the New York Stock Exchange, discussed with Fox Business Wednesday the state of the market amid the reported increase in SPAC (Special Purpose Acquisition) companies in recent years.
SPACs are essentially blank-check entities that register with an exchange, then "reverse-merge" with a company to make it go public without having to go through the process of or deal with the conditions in an Initial Public Offering (IPO).
On "The Claman Countdown", host Liz Claman reported that in 2020, there were 248 SPAC offerings, followed by 613 in 2021.
Richard Grasso is seen with Hillary Rodham Clinton and Mayor Rudolph Giuliani (AFP/Getty) (Getty Images)
However, this year, she said there have only been 78 new SPACs to-date – and that many, including Virgin Orbit, BuzzFeed, Nextdoor, WeWork and SoFi, are all trading at less than $10/share – given what she reported was a typical initial price of $10 per unit.
She asked Grasso about the state of the SPAC market, and whether the system should continue.
"From an investor point of view, they've been a disaster -- just this first quarter of 2022, they're down 27%," he said.
Stock market. (Reuters)
"And if you look at the peak in 2021, they're down 65%. I mean, it's just been one of those fluff concepts that hasn't worked,' Grasso said.
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"I'm told right now there are about 600 SPACs starting out there with pure cash, waiting for acquisition or looking for acquisition targets – And yet when you look at the redemption rate, meaning when a target is identified and the shareholders of the SPAC are asked to approve, 80% of the money is being pulled out."
"SPAC is kind of one of those rocketship ideas that we had in the late 90s or the 1960s. You know, they shoot like a rocket and they fall back to Earth."