Special purpose acquisition companies (Spacs) are turning to costly new tactics to keep investors from jumping ship as market confidence wanes in the once red-hot alternative to IPOs.
Blank-cheque acquisition firms and the companies they acquire are having to hand over bigger stakes in the ventures to investors in some cases, often at big discounts. Deal managers are also seeking backstop financing from investment companies and ploughing in more of their own cash.
Less than three months into 2022, 13 mergers involving Spacs have already fallen through in the US, according to data from industry tracker Spac Research. That compares with a total of 18 in the whole of 2021.
Every transaction is worried about redemptions and every transaction is trying to figure out how to mitigate it
Amir Emami,
global co-head of Spac coverage at RBC Capital Markets
In money terms, almost $9.5 billion worth of mergers have been canned this year, according to Dealogic data.
The main cause of deals being abandoned, market players say, is the risk of redemptions – where investors exercise their right to sell shares in the venture back to the Spac before the merger is completed, and for the price they paid for them.
"Every transaction is worried about redemptions and every transaction is trying to figure out how to mitigate it," said Amir Emami, global co-head of Spac coverage at RBC Capital Markets.
The approaches employed by Spacs include offering bonus stock to investors who choose not to redeem shares.
Spacs are shell companies that raise money in an initial public offering and put it in a trust for the purpose of merging with a private company and taking it public. Since investors are unaware of the target company ahead of the IPO, Spacs often grant them the right to redeem their initial investment as an incentive to put their money in the trust.
Yet significant redemptions undermine the viability of such deals. At the same time, shares of many companies that went public during the boom last year have fared poorly, leaving some investors nursing losses and making new Spacs look more risky.
Indeed, the deals are drying up.
Only 24 Spac mergers, worth $28.3 billion, have been announced so far this year, against the 93 deals worth $233bn in the first quarter of 2021, according to Spac Research. Only 48 new Spacs were floated on US exchanges up to the end of February, compared with 214 during the same period last year, according to data from Dealogic.
"What was an attractive deal, say six months ago, may not be as attractive today given the market has sold off meaningfully since then," Mr Emami said.
The icing on the cake
Measures such as offering extra stock have been successful in getting some mergers over the line, yet the tactic can come at a heavy financial cost for the Spac managers, their target companies and their original investors, who become diluted.
"With a high number of Spacs still seeking targets and the scepticism due to the pullback in the market, it has become harder to persuade target companies to want to engage with Spacs and have the related management distraction," said Atif Azher, partner at law firm Simpson Thacher & Bartlett.
Bonus stocks, or "bonus pools", for investors who eschew redemptions, are typically comprised of founder shares or regular company shares that were reserved for the Spac managers.
In January, in the $9.3bn merger of Cohn Robbins Holdings Corp with lottery operator Allwyn, 6.6 million shares, worth an estimated $65 million, were offered to shareholders who elected not to redeem their shares.
"The best way to maximise participation by Spac shareholders is to bring to market a highly profitable company with exciting growth prospects at an attractive valuation. The bonus share reward is just the icing on the cake," Cohn Robbins co-chairmen Gary Cohn and Clifton Robbins told Reuters.
DPCM Capital, another Spac, gave shareholders about five million shares for not redeeming their existing holding in its $1.2bn merger with quantum computing company D-wave Quantum.
Spacs are also raising additional financings, known as private placements in public equity (Pipes), to get deals over the line. About a dozen Spacs have raised additional Pipes in recent months to mitigate the risk of redemptions.
Some of the fundraising is also done via over-the-counter equity derivative agreements. If investors who buy the shares choose not to redeem them before merger completion, the Spac agrees to buy back those shares from them at a later date after the merger is safely in the bag.
Managers pay millions
Some investment firms have also stepped in in recent months to backstop deals. One of them, Atalaya Capital Management, offered Yellowstone Acquisition Company up to $70m for its $777m merger with airport hanger manager Sky Harbour in January, five months after the Spac deal was announced.
In other cases, it is the Spac investors who step up.
Shareholders of Spac Dynamics Special Purpose Corp, for example, including funds managed by Cathie Wood's Ark Investment Management, Morgan Stanley and T Rowe Price, committed $86m in non-redemption agreements in December to help it complete its merger with biotech company Senti Bio in a deal valued at $601m.
Some Spac managers have also chosen to invest more of their own money into deals to make up for redemptions. For example, the parent company of Trebia Acquisition Corp, a Spac that agreed to merge with marketing platform System1 Inc, agreed to provide a $250m backstop in January 2022 for the $1.4bn deal to close.
"Most of the terminations more recently are more market driven," said Michael Levitt, partner at law firm Freshfields Bruckhaus Deringer.
"They [Spacs] are concerned that the redemptions are going to be too high, and the target company is not going to have enough money to meet its minimum cash condition," he said, referring to the specified amount a Spac must hold upon the deal closing.
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What is Reform?
Reform is a right-wing, populist party led by Nigel Farage, a former MEP who won a seat in the House of Commons last year at his eighth attempt and a prominent figure in the campaign for the UK to leave the European Union.
It was founded in 2018 and originally called the Brexit Party.
Many of its members previously belonged to UKIP or the mainstream Conservatives.
After Brexit took place, the party focused on the reformation of British democracy.
Former Tory deputy chairman Lee Anderson became its first MP after defecting in March 2024.
The party gained support from Elon Musk, and had hoped the tech billionaire would make a £100m donation. However, Mr Musk changed his mind and called for Mr Farage to step down as leader in a row involving the US tycoon's support for far-right figurehead Tommy Robinson who is in prison for contempt of court.
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Studying addiction
This month, Dubai Medical College launched the Middle East’s first master's programme in addiction science.
Together with the Erada Centre for Treatment and Rehabilitation, the college offers a two-year master’s course as well as a one-year diploma in the same subject.
The move was announced earlier this year and is part of a new drive to combat drug abuse and increase the region’s capacity for treating drug addiction.
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Earth under attack: Cosmic impacts throughout history
- 4.5 billion years ago: Mars-sized object smashes into the newly-formed Earth, creating debris that coalesces to form the Moon
- 66 million years ago: 10km-wide asteroid crashes into the Gulf of Mexico, wiping out over 70 per cent of living species – including the dinosaurs.
- 50,000 years ago: 50m-wide iron meteor crashes in Arizona with the violence of 10 megatonne hydrogen bomb, creating the famous 1.2km-wide Barringer Crater
- 1490: Meteor storm over Shansi Province, north-east China when large stones “fell like rain”, reportedly leading to thousands of deaths.
- 1908: 100-metre meteor from the Taurid Complex explodes near the Tunguska river in Siberia with the force of 1,000 Hiroshima-type bombs, devastating 2,000 square kilometres of forest.
- 1998: Comet Shoemaker-Levy 9 breaks apart and crashes into Jupiter in series of impacts that would have annihilated life on Earth.
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ESSENTIALS
The flights
Emirates flies direct from Dubai to Rio de Janeiro from Dh7,000 return including taxes. Avianca fliles from Rio to Cusco via Lima from $399 (Dhxx) return including taxes.
The trip
From US$1,830 per deluxe cabin, twin share, for the one-night Spirit of the Water itinerary and US$4,630 per deluxe cabin for the Peruvian Highlands itinerary, inclusive of meals, and beverages. Surcharges apply for some excursions.
Timeline
2012-2015
The company offers payments/bribes to win key contracts in the Middle East
May 2017
The UK SFO officially opens investigation into Petrofac’s use of agents, corruption, and potential bribery to secure contracts
September 2021
Petrofac pleads guilty to seven counts of failing to prevent bribery under the UK Bribery Act
October 2021
Court fines Petrofac £77 million for bribery. Former executive receives a two-year suspended sentence
December 2024
Petrofac enters into comprehensive restructuring to strengthen the financial position of the group
May 2025
The High Court of England and Wales approves the company’s restructuring plan
July 2025
The Court of Appeal issues a judgment challenging parts of the restructuring plan
August 2025
Petrofac issues a business update to execute the restructuring and confirms it will appeal the Court of Appeal decision
October 2025
Petrofac loses a major TenneT offshore wind contract worth €13 billion. Holding company files for administration in the UK. Petrofac delisted from the London Stock Exchange
November 2025
180 Petrofac employees laid off in the UAE
Scoreline:
Cardiff City 0
Liverpool 2
Wijnaldum 57', Milner 81' (pen)
Water waste
In the UAE’s arid climate, small shrubs, bushes and flower beds usually require about six litres of water per square metre, daily. That increases to 12 litres per square metre a day for small trees, and 300 litres for palm trees.
Horticulturists suggest the best time for watering is before 8am or after 6pm, when water won't be dried up by the sun.
A global report published by the Water Resources Institute in August, ranked the UAE 10th out of 164 nations where water supplies are most stretched.
The Emirates is the world’s third largest per capita water consumer after the US and Canada.
Ticket prices
General admission Dh295 (under-three free)
Buy a four-person Family & Friends ticket and pay for only three tickets, so the fourth family member is free
Buy tickets at: wbworldabudhabi.com/en/tickets
T20 World Cup Qualifier
October 18 – November 2
Opening fixtures
Friday, October 18
ICC Academy: 10am, Scotland v Singapore, 2.10pm, Netherlands v Kenya
Zayed Cricket Stadium: 2.10pm, Hong Kong v Ireland, 7.30pm, Oman v UAE
UAE squad
Ahmed Raza (captain), Rohan Mustafa, Ashfaq Ahmed, Rameez Shahzad, Darius D’Silva, Mohammed Usman, Mohammed Boota, Zawar Farid, Ghulam Shabber, Junaid Siddique, Sultan Ahmed, Imran Haider, Waheed Ahmed, Chirag Suri, Zahoor Khan
Players out: Mohammed Naveed, Shaiman Anwar, Qadeer Ahmed
Players in: Junaid Siddique, Darius D’Silva, Waheed Ahmed
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Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
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Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
