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The frenzy has already led to trouble. The stock of Nikola, an electric car start-up that went public via a SPAC in June, has plunged more than 80 percent after Hindenburg Research, an investment fund, accused the company in September of lying about its technology, overstating business deals and deceptively rolling a truck down a hill in a product video. Trevor Milton, Nikola’s founder and chairman, resigned, and the Securities and Exchange Commission and Justice Department have started investigating the company.
The S.E.C. has also opened inquiries into Clover Health, a health insurance start-up, and Lordstown Motors, an electric truck start-up, which both went public through blank-check companies in recent months.
On March 10, the S.E.C. warned that SPACs face distinct risks and potential conflicts of interest. The agency was particularly critical of those backed by celebrities, concluding that “celebrities, like anyone else, can be lured into participating in a risky investment.”
For now, the special purpose vehicles remain on the prowl for targets.
Jedidiah Yueh, chief executive of Delphix, a data infrastructure company in Redwood City, Calif., has experienced the interest firsthand. Mr. Yueh, who founded Delphix 13 years ago, said SPACs began reaching out last summer as his business picked up in the pandemic. The company, which helps customers process and automate data, recently became profitable and is a candidate to go public.
But Mr. Yueh said he hadn’t decided if Delphix would go public through a traditional offering or another route, such as a “direct listing” or SPAC. As he has sorted through the options, SPACs have flooded his inbox with messages almost every day. One even sent a mailer to Delphix’s unoccupied office last year while everyone worked from home in the pandemic.
Mr. Yueh said he had met with some SPACs out of curiosity. But he quickly got the sense that sponsors were telling him whatever they thought he wanted to hear. Once they learned that Delphix was profitable, “they just switch gears and talk about how easy they are to work with,” he said.
He said he had stopped responding to cold pitches and created a canned response to ward off others. The investors he met with weren’t the kind of long-term backers that Delphix wanted, he said. But in a nod to the trend of celebrity-backed SPACs, he added, “I would have taken a meeting with Shaq.”
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