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Downward arrows over a dollar bill. Illustration: Shoshana Gordon/Axios

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.

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.

Go deeper

Dan Primack, author of Pro Rata
Sep 21, 2021 - Economy & Business

IPO market holds firm amid stock market tumult

Illustration: Aïda Amer/Axios

The IPO market is doing its best Alfred E. Neuman impression so far this week, refusing to entertain everyone else's worries.

The big picture: Both the Dow and S&P 500 fell nearly 2% yesterday, as investors tried to measure the fallout of Chinese construction giant Evergrande defaulting on its $300 billion in liabilities.

Updated 3 hours ago - World

North Korea claims latest missile test new weapon launched from submarine

North Korean state media claims the country's military fired this missile on Tuesday. Photo: Korean Central News Agency

North Korean state media announced that a detected ballistic missile launch off its east coast on Tuesday was a newly developed weapon test-fired from a submarine.

Why it matters: Pyongyang's latest in a series of recent missile launches into the sea happened hours after U.S. officials emphasized their commitment to restart negotiations on North Korea's nuclear weapons program, which have stalled since talks broke down during the Trump administration, AP notes.

5 hours ago - Politics & Policy

Manchin's massive means test

Illustration: Aïda Amer/Axios

Sen. Joe Manchin (D-W.Va.) is offering progressives a trade: He'll vote for their cherished social programs if they accept strict income caps for the recipients, people familiar with the matter tell Axios.

Why it matters: Manchin’s plan to use so-called means-testing for everything from paid family medical leave to elder and disabled care would drastically shrink the size and scope of the programs. It also would bring a key moderate vote to the progressive cause.