Hazal Ak
Two exchange traded funds focused on special purpose acquisition companies, or SPACs, have closed their doors this month, as investors shift their interest away from this once-sizzling part of the financial world.
The Defiance Next Gen SPAC Derived ETF (NYSEARCA:SPAK) and the Morgan Creek – Exos SPAC Originated ETF (SPXZ) both closed up after trading for less than two years.
At its highest point, SPAK had roughly $112M in assets under management and SPXZ amassed $47M at its peak. The two have since liquidated.
Changing market dynamics have turned investors away from more speculative investments, like the kind of startups that come public through SPACs and IPOs. Rising interest rates and a bumpy economic outlook have driven stocks lower in 2022, with higher-risk areas seeing the most dramatic declines.
Among the big-name companies that have come public through SPAC deals, a large contingent has lost significant ground in 2022. This includes Lucid (LCID), which has fallen about 64% since the end of 2021, and Ginkgo Bioworks (DNA), which has lost about 68%.
Elsewhere, SoFi Technologies (SOFI) has declined 61% year to date, Grab Holdings (GRAB) has dropped 57%, DraftKings (DKNG) has fallen 40% and ChargePoint (CHPT) has retreated 15%.
Meanwhile, the pace of companies coming public through SPAC deals has slowed significantly. Some deals continue to push forward, but other high-profile names have run into complications.
For instance, Digital World Acquisition Corp. (DWAC), the SPAC slated to take Donald Trump’s media company public, has stumbled recently amid concerns that the deal won’t go through. Ahead of a key shareholder vote scheduled for Thursday, DWAC was trading at $23.66, compared to a 52-week high of $175.
SPACs have been joined by other more-speculative parts of the market in their declines this year. Other areas that have seen sharp drops include crypto, meme names and unprofitable tech stocks.
The rising rate environment and the continued hawkish tone from Fed Chair Powell have led investors away from the riskier and more speculative SPAC world. The top U.S. monetary policymaker reiterated his aggressive stance towards inflation on Thursday.
“We need to act now, forthrightly and strong” to avoid the kind of inflation that became embedded in expectations in the 1970s, Federal Reserve Chair Jerome Powell said in a moderated conversation at the Cato Institute monetary policy conference.
