{"id":108767,"date":"2021-03-05T13:38:46","date_gmt":"2021-03-05T13:38:46","guid":{"rendered":"https:\/\/fin2me.com\/?p=108767"},"modified":"2021-03-05T13:38:46","modified_gmt":"2021-03-05T13:38:46","slug":"london-stock-exchange-boss-sounds-the-alarm-on-spac-froth","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/london-stock-exchange-boss-sounds-the-alarm-on-spac-froth\/","title":{"rendered":"London stock exchange boss sounds the alarm on SPAC &#x27;froth&#x27;"},"content":{"rendered":"<ul>\n<li>London Stock Exchange Group CEO David Schwimmer warned of &quot;froth&quot; in the red-hot SPAC market.<\/li>\n<li>Excess in U.S. SPACs &quot;could end poorly&quot; for investors, Schwimmer told reporters Friday.<\/li>\n<li>A U.K. government-backed review is calling for reforms to London&#x27;s listings regime.<\/li>\n<\/ul>\n<p>LONDON \u2014 Special purpose acquisition companies, or SPACs, are showing signs of &quot;froth&quot; in the U.S. \u2014 and that doesn&#x27;t bode well for investors, the boss of London&#x27;s stock exchange warned Friday.\u00a0<\/p>\n<p>&quot;There has been some recognition of the froth in the U.S. market,&quot; London Stock Exchange Group (LSEG) CEO David Schwimmer told CNBC&#x27;s &quot;Squawk Box Europe.&quot;<\/p>\n<p>&quot;I think it&#x27;s important that investors, regulators, market participants use SPACs appropriately,&quot; he said.<\/p>\n<p>\u00a0<\/p>\n<p>Excess in the U.S. SPAC market &quot;could end poorly&quot; for investors, Schwimmer told reporters later in the day, according to Reuters.<\/p>\n<p>\u00a0<\/p>\n<p>SPACs are shell companies that raise funds in a public offering to take a privately-held firm public via reverse takeover. They&#x27;ve become an increasingly popular route for some firms \u2014 particularly those in the tech sector \u2014 looking to list their shares.<\/p>\n<p>Last year, U.S.-listed SPACs raised a total of $78.2 billion across 244 IPOs, according to data from Refinitiv. They&#x27;ve already raised more than half of that just two months into 2021.<\/p>\n<p>\u00a0<\/p>\n<p>There are growing worries about highly speculative investing in Wall Street&#x27;s hottest new vehicle. A leisure-focused SPAC recently did a biotech deal, while a cannabis blank-check firm merged with a space company.<\/p>\n<p>\u00a0<\/p>\n<p>The CEO of Goldman Sachs \u2014 one of the biggest beneficiaries from the SPAC boom \u2014 recently said he doesn&#x27;t think excess in the market would lead to a &quot;crisis.&quot;<\/p>\n<p>\u00a0<\/p>\n<p>&quot;The market will naturally flush some of this excess out,&quot; David Solomon told CNBC earlier this year.<\/p>\n<p>\u00a0<\/p>\n<p>Europe has largely missed out on the SPAC hype. In Britain, a government-backed review called for reforms to London&#x27;s listings regime to allow for SPACs that are structured similarly to those in New York.<\/p>\n<p>\u00a0<\/p>\n<p>A common complaint about London-listed SPACs is that trading gets suspended once a merger is announced.<\/p>\n<p>&quot;There are opportunities to adjust the rules in the U.K. regime to avoid \u2026 suspension of trading when a transaction is announced for a SPAC,&quot; Schwimmer told CNBC.<\/p>\n<p>&quot;With those kinds of adjustments, SPACs could be used as one of the tools in the toolkit here for the UK market.&quot;<\/p>\n<h2>GameStop mania<\/h2>\n<p>\u00a0<\/p>\n<p>Meanwhile, regulators have raised the alarm about speculative investing in heavily-shorted stocks like GameStop.<\/p>\n<p>\u00a0<\/p>\n<p>GameStop shares underwent wildly volatile trading earlier in the year due to what&#x27;s known as a &quot;short squeeze&quot; \u2014 where investors push up share prices, forcing short sellers to cover their positions.<\/p>\n<p>The move was largely attributed to the Reddit board WallStreetBets, which had pumped up a number of unloved stocks including GameStop, AMC and BlackBerry.<\/p>\n<p>&quot;We have seen speculative froth in the markets periodically over the years,&quot; Schwimmer said, when asked about GameStop.<\/p>\n<p>&quot;There are some reasons to be concerned in some particular areas in the markets today,&quot; he added. &quot;I&#x27;m not in the investment advice business but I do think it&#x27;s important that investors proceed carefully and make some thoughtful decisions when investing in the market.&quot;<\/p>\n<p>London Stock Exchange Group on Friday posted a \u00a31.1 billion ($1.5 billion) profit for 2020, up 5% from a year earlier. Revenues at the exchange rose 3% to \u00a32.1 billion. LSEG also hiked its dividend by 7%.<\/p>\n<p>That wasn&#x27;t enough to impress investors, however, as the company&#x27;s share price fell 9% Friday.<\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/03\/05\/london-stock-exchange-boss-sounds-the-alarm-on-spac-froth.html\" target=\"_blank\" rel=\"noopener noreferrer\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>London Stock Exchange Group CEO David Schwimmer warned of &quot;froth&quot; in the red-hot SPAC market. Excess in U.S. SPACs &quot;could end poorly&quot; for investors, Schwimmer [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":108766,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>London stock exchange boss sounds the alarm on SPAC &#x27;froth&#x27; - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/london-stock-exchange-boss-sounds-the-alarm-on-spac-froth\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"London stock exchange boss sounds the alarm on SPAC &#x27;froth&#x27; - Fin2me\" \/>\n<meta property=\"og:description\" content=\"London Stock Exchange Group CEO David Schwimmer warned of &quot;froth&quot; in the red-hot SPAC market. 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