The hedge fund manager said he is interested in a deal with X using a variant of a special purpose acquisition company.
Bill Ackman, the hedge fund manager and activist investor, told The Wall Street Journal that he would be interested in a deal with Elon Musk’s X, formerly known as Twitter, to take part of the social media company public via his special purpose acquisition rights company, or SPARC.
But the billionaire had to pull back from the deal in 2021 after the Securities and Exchange Commission raised concerns about the complex transaction. Ackman liquidated all shares in 2022, returned the funds to investors, along with purchasing warrants for the new SPARC. It was the largest payback in the history of SPAC.
But if history is any indication, large-size SPACs—even if they could successfully find a merger target to go public—are very risky. The nearly 200 companies that went public via SPAC in 2021 traded at an average of 64% below IPO prices one year later, according to Jay Ritter, a University of Florida finance professor who tracks the new issues market. The 101 SPAC IPOs in 2022 declined an average of 59% 12 months after their public debut.
SPACs became a popular vehicle for public listing during the Covid-19 pandemic since they are easier, take less time, and face less regulatory scrutiny. At the peak, 248 firms went public through SPACs in 2020, and 613 in 2021, raising $246 billion in total. That’s nearly half the total amount of money raised through IPOs in those two years.
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