SPAC slump: ‘Blank check’ stocks dip on reports of SEC inquiry

The reason SPACs are known as ‘blank check’ firms is that they generally don’t have a merger target when they are formed.

Blank-check stocks slumped on a report that U.S. regulators are scrutinizing one of the hottest corners of the equity market. The IPOX SPAC Index, which tracks special-purpose acquisition companies, extended its selloff into an eighth consecutive day. The gauge is still up 45% since the end of July, compared with a gain of 20% for the S&P 500 Index. Bill Ackman’s Pershing Square Tontine Holdings sank as much as 6.1%. Social Capital Hedosophia, the partnership between serial dealmakers Chamath Palihapitiya and Ian Osborne, slid more than 8% earlier Thursday. Officials at major firms are anticipating letters from the U.S. Securities and Exchange Commission asking about the potential dangers of underwriting a deluge of deals from SPACs, according to two people familiar with the matter. For now, the inquiry appears to be mostly fact-finding, but it could turn into something more formal depending on what regulators uncover, one of the people said. Reuters previously reported the SEC’s inquiries into the industry.