SPAC enthusiasm is slowing, as evidenced by rising redemption rates.
Between the lines: "Redemption rates are very much a barometer of market sentiment," explains SPAC Research founder Ben Kwasnick. Higher redemption rates mean that investors are skeptical of the market and the deals - choosing to pull their money instead of risking losses if the stock price dives.
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By the numbers: In July, the majority of SPAC deals saw redemption rates north of 50%.
About a quarter of them had redemption rates of 80% or above.
That's in sharp contrast with the period between October 2020 and March 2021, when most had 0% redemptions.
Yes, but: Investors are still voting to approve most mergers - even if they're redeeming their shares for those very same deals - a behavior that's concerning some experts.
The big picture: "We're digesting a really long period of over-exuberance, and there's an oversupply in the market," Kwasnick tells Axios, adding that there's decreased demand for SPAC IPOs.
And one byproduct of this weakened demand has been an uptick in sponsors getting anchor investors for their IPOs, often by offering them more favorable terms and even some of their own founder shares.
"I've heard if you can bring the implied cost basis down to $9.50 for anchor investors, they're usually willing to buy 10% of your IPO," an industry source told Axios.
Meanwhile: The market is also less attractive for PIPE investors.
During the boom, when SPAC common shares were trading above their IPO price, participating in a PIPE often meant guaranteed gains.
But that dynamic's changed with many SPAC stocks trading below their IPO prices.
So while the ratio of PIPE size to a deal's minimum cash requirements was at 100% back in February, according to SPAC Research data, it came down to 60% by July.
The bottom line: The SPAC winter is here.