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Illustration: Sarah Grillo/Axios

It may be too soon to tell whether the SPAC party is over — but the forecast for the parade calls for rain.

Why it matters: The phenomenon that has swept Wall Street is now a pop culture buzzword — attracting your favorite celebrities, former politicos, Reddit traders and long-time investors — and drawing increasing scrutiny.

How it works: So called "blank-check" firms go public with the intention of using the money they raise to buy a private company, which then becomes publicly traded after the merger.

  • By the numbers: A little over two months into 2021, almost as many SPACs (246) have gone public as there were in total last year (248, which was a record itself), according to SPAC Research.

Driving the news: The SEC issued a warning on Wednesday against investing in SPACs solely because celebrities are involved or promoting them, echoing some of its alarm from a couple years ago during the digital token frenzy.

  • And earlier Thursday, an advisory committee to the commission held a hearing about SPACs, where questions to the expert panelists largely focused on investor risks and whether additional protections are needed.
  • NYU Law's Michael Ohlrogge pointed out that not only have post-merger returns for investors historically been poor, but that a lot of the true costs are obscured in the disclosures, noting he and his team have had to spend hours looking for and calculating this for even a single SPAC. Certainly, the average retail investor can't be expected to work this out.

Lawmakers are also feeling new pressure to keep SPACs on their radar, with some advocacy groups recently asking Congress for fixes to "tamp down pre-merger hype," among other things.

The other side: "You've had a lot of folks jump into the SPAC market thinking it's like a gold rush. Whenever you have that in any sort of market, there are a lot of bad actors," Arjun Sethi, co-founder of venture firm Tribe Capital, tells Axios.

  • "But you don't want to have it regulated so hard, with a tight iron grip that you lock people out from being able to participate in the upside," Sethi says. (Yes, he has a SPAC).
  • And as Axios' Dan Primack recently argued, there are already guardrails in place preventing a true disaster.

Between the lines: SPACs got swept up in recent stock market jitters — a sign they aren't immune from broader volatility.

  • An index that tracks their performance is now roughly 15% below where it peaked last month.

The bottom line: More rules — plus investors souring on these deals — could be on the horizon, but for now "the party is definitely not over," says Josef Schuster, who created that index.

Go deeper

36 mins ago - World

Biden backs Gaza ceasefire for first time in call with Netanyahu

Biden with Netanyahu in 2010. Photo: Debbi Hill/Pool/ Getty Images

President Biden expressed support for a ceasefire between Israel and Hamas in a call on Thursday evening with Israeli Prime Minister Benjamin Netanyahu, the White House said in a statement.

Why it matters: This is the first time since the beginning of the crisis last Monday that Biden or anyone in his administration has publicly backed a ceasefire. It will increase pressure on Israel to seek an end to the conflict, which Netanyahu has insisted will continue until Hamas' ability to attack Israel is further degraded.

2 hours ago - World

Schumer: "I want to see a ceasefire"

Photo: Sarah Silbiger/Bloomberg via Getty Images

Senate Majority Leader Chuck Schumer (D-N.Y.) told reporters Monday he wants to "see a ceasefire reach quickly and mourn the loss of life."

Why it matters: Schumer is a staunch defender of Israel and has maintained that Israel should be able to defend itself.

5 hours ago - Health

Biden administration to send 20 million U.S.-authorized vaccine doses abroad

Photo: Ole Spata/Picture Alliance via Getty Images

President Biden will send an additional 20 million doses of coronavirus vaccines to other countries by the end of June, including shots authorized by the FDA for use in the U.S., White House press secretary Jen Psaki said Monday.

Why it matters: It will be the first time the U.S. has sent Pfizer, Moderna, and Johnson & Johnson vaccine doses abroad. The administration previously announced plans to export 60 million doses of the AstraZeneca vaccine, which has not been authorized domestically.