The SPACs are back, but without a future

Every market boom has a few laggards, and SPACs are no different. Freightos, a low-revenue cargo booking company with ambitious projections, announced a $500 million deal with Gesher I Acquisition, a SPAC, on Tuesday. Those who keep going in the throes are at great risk.

A year ago, the Freightos operation would have been inconspicuous. Their idea of ​​offering an online platform to book and pay cargo is pretty solid. Freight transport is old fashioned, and Freightos wants to help make it visible and easy. In 2021 it had revenue of $17 million, although it expects bookings on its platform to quintuple by the end of 2023. It already makes gross profit.

The problem is that the SPAC market has left behind the days when an idea and some income were enough. The SEC has proposed rules that, among other things, would require warnings about the use of projections. Until recently, SPACs relied on them loosely, but now the SEC suggests that bankers and others who participate in SPACs from an early stage are worried about being punished if published forecasts don’t come true.

So the market push for SPACs to become a legitimate alternative to IPOs is unraveling, and some established names are having second thoughts. Forbes canceling its merger with Magnum Opus Acquisition is one example. Bill Ackman is about to meet a deadline that will force him to return his pot of money if his SPAC, Pershing Square Tontine Holdings, can’t find a deal.

And there is a reputational risk. Former Citi Michael Klein faced legal challenges over his SPAC’s deal with MultiPlan. Big names like Goldman Sachs and Citigroup have been replaced by Stifel Nicolaus or Nomura in the SPAC league tables, according to SPAC Research, as they hesitate to make deals. Freightos and his financial adviser Oppenheimer could be seeing something that others don’t. Investors, however, have all the warnings they need.