Short sellers come for SPACs.
Investors betting on stocks target special purpose purchasing companies, one of the hottest growth areas on Wall Street. The dollar value of bearish bets on SPAC shares tripled to about $ 2.7 billion from $ 724 million earlier this year, according to S3 Partners.
Some of the attacked stocks belong to large SPACs that have risen in recent months, in part because they have been backed by high-quality financiers. A blank check company created by venture capitalist Chamath Palihapitiya that plans to merge with lending startup Social Finance Inc. is a popular target with 19% of its outstanding shares sold in default, according to data from S&P Global Market Intelligence . Declining interest in Churchill Capital Corp. IV, a SPAC created by former investment banker Michael Klein, which merges with electric vehicle startup Lucid, doubled in March to about 5%.
Others bet against companies after combining with SPACs. Muddy Waters Capital LLC announced last week that it is betting against XL Fleet Corp., a fleet electrification company that went public in December after merging with a SPAC. XL has since said that the Muddy Waters report, which claimed that XL was inflating its sales lines and making misleading claims about its technology, among other issues, has “numerous inaccuracies”.
The share price of XL fell on the day Muddy Waters released its report by about 13%, to $ 13.86, compared to its March 2 close. Shares closed at $ 12.79 on Friday.