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Cramer says stop the SPAC Deluge: We Agree

Jim Cramer calls on underwriters to help stop the massive SPAC IPO Issuance in the Market

Quick Take

In just under 3 months 2021's SPAC IPO issuance has already trounced 2020's issuance. In addition, by our count, there are over 200 SPACs that have filed initial S-1s, awaiting to flood the market with even more IPO capital. 

If all 230 do ultimately price, that would mean there would be almost 650 (!) SPACs out there searching for targets. This dynamic has likely led to some of the downward pricing action that we've been noticing and writing about. 

Amidst all the supply, Jim Cramer has called for banks to slow the pace of SPAC issuance:

We tend to agree with Jim on this one, supply has seemingly gotten a bit ahead of its skis, and investors who aren't careful about the when and who they are buying could get whacked (see CCIV). Just yesterday over 75% of SPACs traded down and almost 25% of pre-deal SPACs had common shares trading below $9.75. That's unheard of in the current market and will be further evidence that the SPAC market will need to cool down.

New Pricings

On that note, today we got two new, large pricings, a 4th from Tilman Fertitta via Landcadia IV (LCAH), and the first for MSD (MSDA), Michael Dell's family office, led by ex IBD head at Goldman Sachs, Gregg Lemkau. Both brought $500M of new IPO capital to market.  

Take Away

Overall, this is likely to be a correction of the SPAC market versus its death (again) as the market is already squeezing the irrationality out. And, with some quality SPACs out there for the taking at or below $10, SPACs still represent an attractive low-risk / high reward potential. It's important to do your due diligence and pick high-quality SPACs with strong investors and operators.