By Claire Obae
- Tiger Woods SPAC, Sports & Health Tech Acquisition Corp, has canceled plans for a $150M IPO
- Out of 33 SPACs that were tied to famous public figures, 21 of them had negative returns in 2021
After a year since filing for an IPO, Sports & Health Tech Acquisition Corp, the Tiger Woods-backed special purpose acquisition company has announced that it is canceling its plans to raise money through an initial public offering of $150 million. This IPO would have valued the blank-check firm at $600 million.
Why This Matters: The SPAC sector has been a major source of corporate finance in the U.S., but is now slowly taking a dip if the news of athlete-backed SPACS taking an L is anything to go by. A SPACs main goal is to raise capital and its major downfall is that there are too many blank check companies willing to do this work. According to the De-SPAC index, out of all the companies that have completed their deals, the returns are down by 67% with another 22% below the 2% mark.
The fact that the majority of the SPACs failing are tied to public figures is also another reason why their failure rate is so high. Specifically, 21 out of 33 SPACs tied to famous public figures have posted negative returns for 2021, according to Bloomberg. So it’s not a shock to see Tiger Woods’ SPAC fall short of IPO goals. The stock market also tends to be irrational so as soon as the public figure starts to do things perceived as negative, the stock price falls.
It’s not just athlete-backed SPACs that performed pretty dismally, also entertainer-backed SPACs were poor performers as well. If we take a look at rapper and business mogul Jay-Z, his cannabis focused SPAC, The Parent Company, performed the worst with an 84% plunge.
What’s Next: The future of SPACs is uncertain though they’re not going away. While it may be painful for SPACs to drop their acquisitions plans, on the bright side it’s a new dawn as the crackdown by regulatory financial bodies begins. The results could be proper strategy execution, improved processes, and value addition.
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