Ask HN: Why do SPACs seem so shady? Are they market scams?

10 points·rexreed··5 comments

The more I see of SPACs, the more it looks shady based on the sorts of companies pursuing SPACs. Why do SPACs exist vs. the typical way that companies go public? Are SPACs legit or some form of market game?

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Aswath Damodaran has a great rundown on how they’re just the latest charade:

https://youtu.be/Y8E2f0V2NVI

They're not necessarily scams, but SPACs have more leeway as regards regulations, so it's no surprise we see shady folks flocking towards it.

For example, the kind of financial projections allowed in SPAC disclosures will never pass the smell test in a conventional S-1 filing for an IPO. It's kind of the wild,wild west now with a high noise-to-signal ratio.

Hopefully, the suitable regulations will gradually roll in, as current SEC chair Gary Gensler is pushing for.

https://www.cnbc.com/amp/2021/12/09/sec-chair-gensler-seeks-...

"SPACs are a way for companies to list on the public markets without going through the onerous process of listing normally [...]. SPACs raise money from the public markets to buy a private firm, in effect making that firm publicly traded."

https://sifted.eu/articles/healthtech-babylon-spac/

SPACs "possibly a “softer” route to the public stock markets."

https://sifted.eu/articles/etoro-goes-spac-route/

Yes that's the definition, but the way it's being used seems to be abused: https://www.mergersandinquisitions.com/great-spac-scam/

Most SPACs still need to at least file with the SEC so their is government oversight and financial transparency with them. More info here:

https://www.sec.gov/oiea/investor-alerts-and-bulletins/what-...

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