Goldman Sachs halts work in SPAC market
The move comes after SEC issues new guidelines on once-hot market
Goldman Sachs Group is withdrawing from the SPAC market over new guidelines from
regulators, an ominous sign for real estate companies looking to go public through a so-called SPAC, or special purpose acquisition vehicle.
The investment bank, among the largest underwriters of SPACs, has been informing SPAC sponsors that it will be ending its involvement, according to Bloomberg, citing people close to the matter. Goldman Sachs will also halt issuance of new SPACs, the publication reported.
Goldman Sachs still plans to continue to advise companies that are close to completing a process known as de-SPAC, which is when a SPAC has to complete its merger with a target firm in order to finalize the deal, according to Bloomberg.
The news comes after the SEC recently proposed rules requiring SPACs to provide more disclosure on ownership and performance forecasts. Some SPACs would also have to register as investment companies, adding more regulatory scrutiny.
The popularity of SPACs was at a fever pitch in 2021. A record 613 SPACs pulled in a total of $145 billion in 2021, up 91 percent from the amount raised in 2020, according to the accounting firm EisnerAmper. A SPAC is a work-around to the traditional public offering process. With a SPAC, a company doesn’t have to disclose specific information about its business plan to investors. Regulators have raised concerns about the risks to traditional retail investors.
Real estate, especially proptech companies, rushed into the space in the past two years. Recently, SPAC’s stock prices have plummeted. Notably, Opendoor, an iBuyer that went public in late 2020, started trading around $31 in December 2020, peaking at around $35 in February. Today, Opendoor trades around $6.
Goldman Sachs’ move could leave some SPACs that have already gone public in limbo, since some are still looking for a company to take over. Now those firms will have to find a new investment bank for the de-SPAC process.
[Bloomberg] — Keith Larsen