Exclusive: UBS imposes SPAC restrictions on wealthy customers

Exclusive: UBS imposes SPAC restrictions on wealthy customers

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Earlier this month, UBS (UBS) a person familiar with the matter told CNN Business that its wealth management clients may only trade on an unsolicited basis.

In other words, UBS advisers may not call their wealthy clients to encourage them to buy or sell specific SPACs on the open market. Once the newly merged entity becomes known, the UBS advisers will be allowed to store the inventory.

A UBS spokesman declined to comment.

The person familiar with the matter decided that the decision was made due to the limited availability of information and research on SPACs before merging with private companies.

Some SPACs ‘make no sense’

Indeed, little is known about SPACs until they determine which company they want to disclose. SPACs do not have operating companies, only a blank check and a management team looking for the right merger candidate.

The SPAC restrictions at UBS do not extend to SPAC IPO offers. UBS’s financial advisers can still review the so-called primary SPAC offerings with eligible clients in transactions where UBS is an underwriter of the exchange, the person said. (Private banks such as UBS usually only offer these transactions to wealthy customers with a net worth above a certain level.)

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The SPAC restrictions by UBS come as some experts, including former Federal Reserve officials and famed investor Jeremy Grantham, worry about overturning the blank check. US-listed SPACs have raised more money this year than in the whole of 2020 – and the first quarter of the year has not even ended yet.

“If you look at the SPAC market, there are some attractive new companies and new technologies that are financing effectively,” Rick Rieder, BlackRock’s chief investment officer for global fixed income, told CNN Business this week. “And then there are some who have no sense.”

Rieder expressed his concern about how some SPACs will ever be able to grow to the increased multiples they get. “You have to be really selective about where you go and not just hop on that train because it’s gone crazy,” he said.

Big banks like UBS make money

Celebrities, including Alex Rodriguez, Jay-Z and Ciara Wilson, have been giving their star power to SPACs for the past few months.
The SEC last week issued a warning urging investors not to buy SPACs simply because of the involvement of a celebrity. “Celebrities, like anyone else, can be lured into a risky investment or better sustain the risk of loss,” the SEC said.
Do not invest in a SPAC just because a celeb is involved, warns SEC

Large banks, including UBS, deserve the SPAC craze. Investment banks receive fees in exchange for finding buyers for SPAC shares and placing a floor below their share price. These fees are not as large as Wall Street businesses earn on traditional stock exchange listings, but the large amount of SPAC transactions has contributed to it.

Last year, UBS was the primary underwriter, or book winner, on 22 SPACs listed in the United States. It is sixth among the major Wall Street businesses, according to Dealogic. The Swiss bank, along with Citigroup, was one of the leading underwriters of Bill Ackman’s SPAC, which raised $ 4 billion last year and is still looking for a merger candidate. According to Dealogic, UBS has led another 15 SPACs so far this year.
UBS is actively adopting in this thriving part of the capital market industry. The company listed a position on LinkedIn a week ago for an investment banker in New York that focused on SPACs.
Earlier this week, Martin Blessing, the former co-president of UBS Global Wealth Management, reportedly launched a SPAC aimed at buying a financial technology company.

It is not clear whether other large banks impose similar restrictions. Wells Fargo declined to comment, while company representatives including Goldman Sachs, Bank of America and JPMorgan did not respond to inquiries.

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