Chris Bryant’s View to 2022: A Reckoning for SPACs?

(Bloomberg Opinion) --  

What to Expect in 2022

2021 was a year of frothiness and excess in financial markets, driven in part by increased retail participation. In contrast, 2022 should be when financial fundamentals reassert themselves. Expectations that interest rates will have to rise sooner to curb inflation are triggering a reassessment of profitless technology stocks and firms that have merged with SPACs. This may dent the valuation hopes for the next wave of private companies looking to list on the stock exchange after a gush of money inflated the number of unicorns (start-ups worth at least $1 billion) to almost 1,000. SPAC issuance will happen at a slower pace compared to the peak in the first quarter of 2021 as regulators continue to scrutinize overly optimistic financial projections and conflicts of interest. Some SPACs will struggle to find good quality targets in the limited time available and existing deals may need to be re-cut or abandoned.  

The electric vehicle startups that hope to repeat Tesla's success face a big test as they ramp up production. Rather than wilt under pressure from these new entrants, incumbents will continue to launch their own electric models, hastening the demise of combustion engines. Watch out for semiconductor shortages and other supply chain issues persisting for longer than hoped. And keep an eye on soaring carbon prices: polluting is becoming far more expensive, as it should be.

From the Year Behind Us:

A $1 Trillion Tesla Almost Makes You Feel for the Other Car Giants: Rivals have tried every trick in the book to rein in Tesla's lead. So far nothing has really worked. 

Suez Shows Civilization Is More Vulnerable Than We Think: Choke points imperil global supply chains, and the remedies aren't simple or cheap.

Container Shipping Earnings Now Rival Apple. It's Not a Good Look: Container lines are making oodles of money from their customers' misery. If the profiteering label sticks, they risk a policy backlash in three areas: competition, climate and taxation.

Oops, I Accidentally Created a Mini SPAC Meme Stock: Bizarrely, retail investors are piling into cash-starved former SPACs. Executives must be delighted but it won't end well for those holding the bag.

Finally! Bill Gates and Musk Agree on Something: Though not a silver bullet, direct air capture is an environmental insurance policy we can't ignore.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

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