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Green SPACs Struggle After Years of Success
Investors are souring on blank-check companies in general
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Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ
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June 17, 2021 5:30 am ET
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SPACs and green companies were two of the hottest pandemic investments. Combining the two—green SPACs—has been even more profitable, but there is evidence this is changing.
Special-purpose acquisition companies that pledge to merge with renewable-energy, electric-vehicle and other sustainable businesses raised more than $120 billion since March 2020. SPACs, known as blank-check companies, raise cash from investors with the goal of buying a private company.
For years, those deals have paid off. Going back to 2016, green-focused SPACs that have completed their acquisitions have outperformed other SPACs that have done deals, according to a Dow Jones Market Data analysis of information provided by SPAC Research.
In the 90 days after their deals closed, SPACs with a green focus posted average share-price gains of just over 10%, according to that analysis. Share prices of all other SPACs fell by an average of 3%. Share prices of SPACs often rise after deals are announced and then weaken after the deals close.
Enthusiasm for SPACs, especially green ones, has waned in recent months. Since late last year, shares of green-focused companies that have announced acquisitions but have yet to close their deals have fallen by an average of 24% in 90 days after the deals were announced; shares of other SPACs have fallen by an average of 9%.
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