Investors are actively betting against special-purpose acquisition companies, or SPACs, even as stock prices in the sector appear to have stabilized over the past month, according to S3 Partners.
Churchill Capital Corp. IV
saw the largest amount of new short selling in that period, followed by Altimeter Growth Corp.
and Social Capital Hedosophia Holdings V
said Ihor Dusaniwsky, managing director of predictive analytics at S3, in a note on Thursday. Churchill saw $271.6 million of new short sales over the past 30 days, the report said.
SPACs, or blank-check companies that raise capital through an initial public offering with the aim of funding an acquisition within a couple of years, boomed in 2020. And as issuance surged into early 2021, many investors grew increasingly concerned that the SPAC market was frothy.
Some of that concern may be reflected in the SPAC & New Issue ETF
an exchange-traded fund that invests in a broad portfolio of blank-check companies that have completed IPOs in the past two years. The ETF fell 5.75% in March, creating the sole monthly loss for the fund this year, FactSet data show.
But the ETF’s decline in the past month is “minimal,” at about 1.3%, while new short selling in the SPAC sector increased by $673 million over the last 30 days, according to the S3 report. Short sellers make money when stock prices fall.
“We are seeing active short selling in the sector,” even as SPAC stock prices have been “relatively stable,” Dusaniwsky said in his note. Stabilized prices have “slowed the growing profitability of short positions in the sector,” with SPAC shorts still up 33% for the year.
Read: SPAC investors worry about a ‘stigma’ after SEC warnings, surge in lawsuits
Altimeter Growth Corp. was trading 1.7% lower Friday afternoon, down 2% for the week and deepening monthly losses to 15.3%, FactSet data show.
Churchill Capital Corp. IV was down 0.7% in afternoon trading Friday, with the SPAC’s gains for the week nearing 11%, according to FactSet. The weekly surge hasn’t been enough to erase losses in May of about 6% based on Friday afternoon trading. And that means profits for short sellers, at least on paper.
“Churchill Capital Corp V (CCIV) continues to be the most profitable SPAC short by a wide margin,” Dusaniwsky wrote in his report, which shows wagers against the SPAC have gained about 3%, or $25 million, over the past 30 days. Short bets against Altimeter had the next largest profit over the same period, rising about $19.5 million, or 14%, the report shows.
Meanwhile, short sellers in Social Capital Hedosophia Holdings V are in the red over the past 30 days, according to S3. The SPAC was up about 1.3% Friday afternoon, pushing its weekly gains to about 25% and May returns to almost 10%.