(Bloomberg) — A SPAC that counts former US House Speaker Paul Ryan as chairman became the latest vehicle to be bailed on by investors who want their money back.
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Executive Network Partnering Corp. saw roughly 95% of its investors opt to swap their shares for $10 when they voted on a tie-up with oil and gas company Granite Ridge Resources Inc. The deal will leave a little more than two million of the initial 41 million shares outstanding ahead of the merger’s closing.
The recent rise in redemptions is among the many problems hitting SPAC sponsors, as investors who either don’t like the deal, or simply want their initial investment back, take their money and go. In the last few months, it’s hit a vehicle led by Cantor Fitzgerald chief executive Howard Lutnick, one led by Gary Cohn — a former adviser to Donald Trump — and another led by the “SPAC King” himself, Chamath Palihapitiya.
The average redemption rate for October sits at 92%, on pace for a record high, and notably higher than the average of 57% seen last year, according to Boardroom Alpha data.
Shares of Executive Network Partnering have slumped 7.1% this week, around the redemption deadline and deal vote, while warrants, which entitle holders to buy shares at $11.50, remain worth $1.05 after surging when the deal was announced in May.
“Shareholders have an incentive to approve even a bad deal because the warrants can still have value,” Jay Ritter, a finance professor at the University of Florida, said by phone this week. “And if the stock falls near $10 they can redeem and get the money back.”
SPACs raise money through public offerings with plans to buy a private business. They have limited time to complete a deal, typically two years. If holders don’t like the eventual target — or if a SPAC fails to find anything by a set deadline — investors can redeem their shares for cash at the IPO price, plus any interest earned.
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