Short sellers are coming for SPACs.
Investors betting on stocks are focusing on special-purpose acquisitions, one of the hottest growth areas on Wall Street. The data from S3 Partners more than tripled the dollar value of clumsy bets against shares in SPACs to about $ 2.7 billion, compared to $ 724 million at the beginning of the year.
Some of the stocks being attacked belong to large SPACs that have risen in recent months, in part because they were backed by high-end financiers. A white check company founded by venture capitalist Chamath Palihapitiya, which plans to merge with lending company Social Finance Inc., is a popular target, with 19% of its outstanding shares sold short, according to data from S&P Global Market Intelligence. The short stake in Churchill Capital Corp. IV, a SPAC created by former investment banker Michael Klein and merging with the start-up of electric vehicles Lucid, more than doubled in March to about 5%.
Others venture against companies after being combined with SPACs. Muddy Waters Capital LLC announced last week it was betting on XL Fleet Corp., a fleet electrification company that became known in December after it merged with a SPAC. XL has since said that Muddy Waters’ report, in which it is alleged that XL blew up its sales pipe and made, among other things, misleading allegations about its technology, has “numerous inaccuracies”.
XL’s share price fell the day Muddy Waters released its report by about 13%, to $ 13.86, from the previous close on March 2. Shares closed at $ 12.79 on Friday.