Jay Ritter and Minmo Gahng
Cordell Eminent Scholar Jay Ritter and finance Ph.D. student Minmo Gahng.

SPAC Sponsors Were Winners Even on Losers

Money managers who oversaw blank-check companies kept making profits even in the face of significant losses to stock investors.

“There is no question that the sponsors had great returns at the same time that public market investors had very negative returns,” said Cordell Eminent Scholar Jay Ritter, who wrote a new paper, along with Ph.D. student Minmo Gahng at the University of Florida and alumnus Donghang Zhang at the University of South Carolina, which found that stock-market investors in SPACs that merged with private companies since 2015 lost an average 37% of their investment a year after the merger through the end of September. At the same time, SPAC managers, known as sponsors, turned an average investment of about $8 million into about $54 million, giving them average annualized returns of 110% on their initial investment in the SPACs. 

Read more about the research findings in this story from the Wall Street Journal