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Around 100 special purpose acquisition companies, or SPACs, went public each month in the first quarter of the year. So far in April, you could count the number of those initial public offerings on two hands.

The sudden drop in debuts of the blank-cheque funds, which are created with the sole purpose of finding an unspecified private company to acquire, has market watchers asking whether this is a pause – or a more permanent plunge.

The slowdown coincides with increased scrutiny by the U.S. Securities and Exchange Commission. The regulator issued a statement at the end of last month highlighting “the key considerations related to the unique risks and challenges of a private company entering the public markets through a merger with a SPAC.” Not long after, another note offered “guidance” on some of the trickier accounting issues related to blank-cheque funds. Neither statement suggested any rule changes, but with Gary Gensler, the SEC’s new enforcement-minded chair, taking over this week, SPAC sponsors have slowed their roll.

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The recent performance of SPACs has also been lousy. Analysts at Goldman Sachs note that a stock price index of 200 SPACs (pre- and post-merger) has badly underperformed the market this year, down 17 per cent versus a 10-per-cent gain in the S&P 500. SPACs have also lagged an index of unprofitable tech stocks, suggesting that investors have particular concerns about SPACs, because plenty of them have acquired other unprofitable tech companies.

But we haven’t heard the last of SPACs. The amount of money these shell companies have raised to date could drive US$900-billion in acquisition activity over the next two years, according to the Goldman analysts. And more than 25 SPACs filed IPO registration documents this month, per SPAC Research, adding to a pipeline of more than 200 others that have disclosed plans to go public but haven’t yet sealed the deal, for whatever reason.

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