SPACs were hugely successful (for banks)

But you lost your shirt.

Remember SPACs? For a while, you couldn’t turn around without hearing about a celeb who was backing a “blank check” IPO. It was confusing, because SPACs don’t make any sense: you buy into a company at $10/share. The company has no business, no products, nothing. But it plans on going public, and then buying another company.

In theory, you’re betting that some celebrity-endorsed randos will take all the $10 share buy-ins and use the money to buy another company — a company that couldn’t go public otherwise — and that company, despite its deficiencies, will go on to make enough money to make those $10 shares pay off.

This is a bad bet. As the dust settles on the SPAC run, the average SPAC is down 36%, and SPAC investors have collectively lost $4.8b (for comparison, the overall market is down 14% over the same period). In retrospect, this was an obvious outcome, as, by definition, a SPAC investment is a blind bet, like throwing darts at the stock market.

Which raises the question, how did everyday investors come to plow $21.3b into the stock equivalent of a carny midway lucky dip? The answer: the world’s largest banks convinced them to, by spending millions promoting SPACs as the next great investment. It was — for the banks. As Jessica DiNapoli reports for…