Grasso’s rocket ship analogy might not be accidental. <\/p>\n
In existence for decades, SPACs suddenly exploded in popularity in late 2019 when billionaire entrepreneur Sir Richard Branson chose the blank-check option to take his space tourism company Virgin Galactic public. <\/p>\n
Richard Branson wears a Virgin Galactic spacesuit. (Credit: Virgin Galactic)<\/span><\/p>\n Touted as the faster, less expensive alternative to traditional IPOs (Initial Public Offerings), SPACS have no commercial operations themselves. They are born strictly to list on an exchange in order to raise capital, so they can acquire or reverse-merger with a private "target" company.<\/p>\n FORMER SEC CHAIR ON THE MANY 'CONCERNS' SURROUNDING SPACS AMID EXPECTED NEW RULES<\/strong><\/p>\n At this time last year, SPACs, or Special Purpose Acquisition Companies, were taking private companies public at a torrid pace. The boom began in 2020 when a record 248 companies went public via SPAC. That record was quickly shattered in 2021 when 613 companies used the blank-check road to land on Wall Street. Indeed, the trajectory in their popularity has been nothing short of stunning, as has their sudden disappearance.<\/p>\n Former NYSE Chairman & CEO Dick Grasso. (Photo by Steven Ferdman\/Getty Images)<\/span><\/p>\n In the first quarter of this year, SPACs have managed a paltry 78 listings.<\/p>\n "If you look at the peak in 2021, they are down 65%. It’s just one of those fluff concepts that hasn’t worked," said Grasso. He pointed to an imbalance in the SPAC market: too many grooms looking for too few brides. <\/p>\n "Right now there are about 600 SPACs sitting out there with pure cash, waiting for acquisitions 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 it, 80% of the money is being pulled out."<\/p>\n SEC’S GARY GENSLER SEEKS TO LEVEL PLAYING FIELD BETWEEN SPACS, TRADITIONAL IPOS<\/strong><\/p>\n Such was the case with digital media company Buzzfeed, which debuted on Dec. 6 last year in a splashy NASDAQ ceremony. Days before, the Wall Street Journal reported that 94% of the $287.5 million the SPAC raised has been withdrawn by investors. That made for a disastrous debut. Unlike traditional IPOs, which price according to a combination of market conditions and other factors, SPACs typically price at $10. After initially spiking, BZFD ended its opening day down more than 11%. Shares lost 39% in their first week and haven’t recovered. <\/p>\n Grasso said some of the onus rests on regulators and exchanges, upon which SPACs list to send up warning flares. <\/p>\n "It's important for regulators and exchanges to have clear-cut guidelines that show perspective investors what the risks factors are," he explained.<\/p>\n![](\"https:\/\/a57.foxnews.com\/static.foxbusiness.com\/foxbusiness.com\/content\/uploads\/2019\/10\/931\/523\/RB_3.jpg?ve=1&tl=1\")
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\n \nTicker<\/th>\n Security<\/th>\n Last<\/th>\n Change<\/th>\n Change %<\/th>\n<\/tr>\n<\/thead>\n \n SPCE<\/td>\n VIRGIN GALACTIC HOLDINGS INC.<\/td>\n 9.12<\/td>\n +0.30<\/td>\n +3.40%<\/td>\n<\/tr>\n \n BZFD<\/td>\n 890 5TH AVENUE PARTNERS INC<\/td>\n 4.98<\/td>\n -0.04<\/td>\n -0.80%<\/td>\n<\/tr>\n \n <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n