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The SPAC market starts 2022 with abysmal losses, abandoned deals

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A trader is comforted by a coworker as they work on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City.
Eduardo Munoz Alvarez / Getty Images

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The oversaturated SPAC market is continuing to get crushed in the new year as speculative stocks with little earnings fall further out of favor in the face of rising rates, while a growing number of deals were abandoned in the tough environment.

Companies that went public via blank-check deals have been among those worst affected by January's tech-driven sell-off. Meanwhile, faced with unfavorable market conditions, many sponsors have been forced to scrap their proposed deals, sometimes even before the SPACs got listed.

"The SPAC bubble is bursting," said Chris Senyek, senior equity research analyst at Wolfe Research. "SPAC shares are extremely volatile due to their speculative nature."

The proprietary CNBC SPAC Post Deal Index, which is comprised of SPACs that have completed their mergers and taken their target companies public, tumbled 23% in January, even more abysmal than the tech-heavy Nasdaq Composite's 9% loss when it suffered the worst month since March 2020.

Some of the biggest losers last month included clean energy player Heliogen, self-driving related companies Aurora Innovation and Embark and 3D technology company Matterport, which all tumbled more than 50% in a single month.

SPACs stand for special purpose acquisition companies, which raise capital in an initial public offering and use the cash to merge with a private company and take it public, usually within two years.

The market enjoyed a record year with more than $160 billion raised on U.S. exchanges in 2021, nearly double the prior year's level, according to data from SPAC Research. Investors once piled into shares of these empty corporate shells hoping they would hit a home run.

After a year of issuance explosion, there are now almost 600 SPACs searching for an acquisition target, according to SPAC Research. As the market gets increasingly competitive, some announced deals failed to make it to fruition.

The planned merger of Fertitta Entertainment and the blank-check firm Fast Acquisition Corp was called off at the end of last year. Recent deals that have been abandoned also included online grill retailer BBQGuys, fintech firm Acorns and cloud software platform ServiceMax. 

Meanwhile, there has been a growing number of SPAC listing withdrawals, meaning the sponsors decided to pull the plug on their listing after filing the initial S-1. There were nearly 20 such cases in the month of January, a jump from only single digits in the prior two quarters, according to SPAC Research.

— CNBC's Gina Francolla contributed reporting.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns, and CNBC has a content partnership with it.

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