SPACs Are Warning They May Go Bust

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More than two dozen companies say they can’t survive much longer

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Among those issued the warnings—which come when auditors of a company determine that there is “substantial doubt” about its ability to remain in place for the next 12 months—whether a company plans to build an air-taxi network There have been several upstart electric-vehicle companies and scooter rental businesses.

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Audit Analytics said companies with warnings accounted for more than 10% of the 232 companies listed through SPAC in that period. Audit Analytics said that percentage is nearly double for companies that are listed through more traditional initial public offerings. This count does not include the hundreds of IPOs of blank-check companies—prior to the merger of SPACs into a private company—which are often a concern of their own.

The relatively large number of dire warnings is the latest example of the deteriorating SPAC sector, where many companies have raised hundreds of millions of dollars as part of public listings. Many companies, especially startups with low revenue, quickly found that meeting their estimates was harder than they were told. A large proportion of young companies in this sector have missed their forecasts.

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“We’re going to see more of this,” said Michael Dumbra, a professor at the University at Buffalo who studies SPACs, of the go-anxiety notices. “The cash flow is not coming,” he said.

SPACs—blank Czech companies with no operations that allow private companies to be listed on public markets by merging with them—exploded in use starting in mid-2020. One highlight was that SPACs have looser rules than IPOs, allowing startups to woo investors with projections of revenue and profits. More than 300 companies have publicly listed through SPAC since the beginning of 2020.

Regulators have since said that they expect to change the rules surrounding SPAC’s projections and make them more like an IPO. Shares of companies listed through SPAC in 2021 were down an average of 59.5% as of Tuesday, according to an analysis by University of Florida researchers Minmo Gahung and Jay Ritter.

view glass window manufacturer Inc.

Creates windows that automatically change in color depending on the amount of sunlight. Silicon Valley-based company wins over deep-pocketed startup funder SoftBank Group Corporation

, which pledged nearly $1 billion. In an investor presentation, it compared itself to and Tesla,

See merger with SPAC in 2021, raised $815 million. The company told investors that it did not require additional financing before becoming profitable.

View’s cache is depleted. By the end of the year, it had $281 million, down from $518 million nine months ago.

It has not reported any quarter Financial results from May 2021, and the Nasdaq have warned it may delist the stock, which is down more than 90% from its peak. View has said it is in the process of reinstating its earnings.

The company said in a recent filing that it expects to include a worrying warning when reporting those results on May 31, saying it has “sufficient financial resources to fund its operations over the next 12 months”. “There are no. A spokesperson declined to comment.

Companies that issue such warnings are often evasive. Additionally, the auditors noted that a large proportion of companies that went bankrupt never issued such warnings.

The electric-vehicle maker, which was popular among SPAC investors looking for the next Tesla, has often foreseen rapid growth before becoming so much as a factory. Since early 2021, at least six have disclosed investigations by the US Securities and Exchange Commission. Three car or battery manufacturers have issued warnings of concern.

The conflict extends to other types of vehicles. Scooter-rental Company Helbiz Inc. of

Recent financial statements include a worrying caveat. The company said in a SPAC presentation in early 2021 that it had a “clear path to profit” for the year, but ended with a loss of $72 million. The company did not respond to a request for comment.

Some companies raised less than they expected—and now face the prospect of a cooling market for funding amid the tech stock route. Lilium NV raised $584 million in a SPAC deal last summer. It plans to build an electric air taxi that can take off and land like a helicopter – a type of vehicle that has yet to be certified by regulators.

The company initially said it expected to have enough cash to fund the planned start of production in 2024. But it raised about $250 million less than expected in its SPAC merger last summer. Its 2021 annual report included a worrying warning. It also noted that the company would “rely on additional financing” for its operations.

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