what are the risks of a spac 
an investor in a spac ipo trusts that promoters are successful in acquiring or merging with a suitable target company in the future however there exists a reduced degree of oversight from regulators and a lack of disclosure from the spac burdening retail investors with the risk that the investment may be overhyped or even fraudulent returns from spacs may not meet expectations offered during the promotion stage strategists at goldman sachs noted in september 2021 that of the 172 spacs that had closed a deal since the start of 2020 the median spac had outperformed the russell 3000 index from its ipo to deal announcement however six months after deal closure the median spac had underperformed the russell 3000 index by 42 percentage points 4as many as 70 of spacs that had their ipo in 2021 were trading below their 10 offer price by the end of that year according to a renaissance capital strategist this downward trend could signal that the spac bubble that some market experts had predicted may be bursting 4former president donald trump s conservative truth social app was brought public via a spac known as digital world acquisition corp dwac after initially rising to around 100 per share after the deal was announced in the spring of 2022 dwac shares were trading sharply lower at just around 18 toward the end of 2022 5one risk to investing in a spac is that even if they identify a company to acquire the deal may not end up going through according to industry reports more than 55 supposed spac deals worth tens of billions of dollars ended up being terminated in 2022 with an additional 65 spac sponsors shutting down entirely 6there are any number of reasons why a spac deal might fail because of how spacs are structured investors typically get back the par value of the shares usually 10 per share but may lose out if they buy shares at higher prices in anticipation of closing a deal indeed investors are only entitled to the pro rata share of the trust account and not the price at which spac shares are bought on the market 7though popular in recent years spacs face new accounting regulations issued by the u s securities and exchange commission sec as of april 2021 causing new spac filings to plummet in the second quarter from the record levels of 2021 s first quarter 8many celebrities including entertainers and professional athletes became so heavily invested in spacs that the sec issued an investor alert in march 2021 cautioning investors not to make investment decisions based solely on celebrity involvement 9by early 2022 spacs decreased in popularity due to increased regulatory oversight and less than expected performance 10real world examples of spacsrichard branson s virgin galactic was a high profile deal involving special purpose acquisition companies venture capitalist chamath palihapitiya s spac social capital hedosophia holdings bought a 49 stake in virgin galactic for 800 million before listing the company in 2019 11in 2020 bill ackman founder of pershing square capital management sponsored his own and the largest ever spac pershing square tontine holdings which raised 4 billion in its offering on july 22 2020 in august 2021 ackman planned to liquidate the spac but as of 2022 the spac has not been liquidated with efforts still under way to find a deal 1213