Author: Zhang Zeyi
Source: Wall Street
Niuniu knocked on the blackboard:
As loans became more difficult, the attractiveness of investing in SPAC plummeted and began to be abandoned by hedge funds. The number of SPAC listed in April was only 10% of that in March.
It has been some time since the Archegos burst, but who would have thought that the aftermath of the explosion would make the SPAC (special purpose acquisition company) market an unexpected "victim".
As a result of the collapse of Archegos, Wall Street banks began to tighten their lending terms to hedge funds, while most of SPAC's investments came from various hedge funds, according to several SPAC market participants.
One banker in the SPAC market said: "after the Archegos incident, it has become significantly more difficult for hedge funds to borrow, and the main return on hedging strategies comes from the high leverage obtained through loans." "
The lack of leverage significantly reduces the profitability of hedging strategies, especially for some hedge funds that make early investments.
The main strategy of hedge funds investing in the SPAC market is to borrow money to buy a large number of shares of SPAC companies under $10. These SPAC companies deposit the raised money into trust funds and buy US Treasuries to achieve risk-free returns, and then find suitable mergers and acquisitions in the market to make a profit.
But as loans become more difficult, SPAC investments are clearly less attractive, with analysts saying that as banks no longer provide leverage, there are a large number of unbought shares of SPAC under $10 in the market, which means these SPAC companies are unable to raise money.
Figures show that only 13 SPAC companies went public in April, compared with 110 in March.
Edit / irisz