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Chris Bryant

Hedge Funds Are Demanding Their SPAC Money Back

The special sauce that's flavored blank-check firms has become potential poison. It’s time to reform their financial incentives. 

Cashing in too early?

Cashing in too early?

Photographer: Bloomberg/Bloomberg

Last month, Atlas Crest Investment Corp., a blank-check firm created by investment banker Ken Moelis, spectacularly lopped $1 billion off the enterprise value off its $2.7 billion deal with flying taxi company Archer Aviation. Several factors contributed to this reset, including an intellectual property dispute with a rival and the fact Archer has yet to finish developing a fully operational prototype or agree to certification requirements with regulators, according to this filing.

Notably Atlas also cited the general turbulence in the market for special purpose acquisitions companies, specifically how many SPACs are trading under the value of their cash holdings – typically $10 a share – and the increase in what are called redemptions. That is, more investors are asking for their money back rather than funding SPAC mergers.