SPAC Mania Gives Way to ‘Meh’ as ETFs Drop Toward All-Time Lows

The once red-hot SPAC market has gone cold.

Two of the biggest exchange-traded funds tracking the hundreds of special purpose acquisition companies that popped up over the past year, as the oddball financial structures went from bit player to center stage, are trading at or near all-time lows.

The Defiance Next Gen SPAC Derived ETF (SPAK) plunged as much as 4.1% on Tuesday, extending its year-to-date losses at one point to about 20%. Its peer, the Morgan Creek-Exos SPAC Originated ETF (SPXZ), was down 30% since its January launch. The losses shrank as tech dip buyers emerged, but SPACs and other speculative parts of the market still trail the broader indexes.

These declines highlight a waning appetite for SPACs amid two key inflection points. A rotation out of growth companies, including likely targets for blank-check firms. And a dissipation of retail dollars -- which many SPACs were tailor-made for -- from the market.

“The things that are getting the most pain are the ones that were the most risky to begin with -- they have a ways to go with profitability, valuations were stretched,” said Michael Arone, chief investment strategist for the U.S. SPDR exchange-traded fund business at State Street Global Advisors. “Those are the areas of the market that are likely to sell off more aggressively.”

The IPOX SPAC Index (SPAC), which tracks the performance of a broad group of special purpose acquisition companies, has fallen eight out of the last nine sessions and is down more than 20% since a mid-February peak.

Included in the selloff have been the blank-check companies tied to the face of the SPAC boom: investor Chamath Palihapitiya.