Celebrity SPACs Leave Famous Winners Looking More Like Losers
Betting on flashy names like Shawn “Jay-Z” Carter, Shaquille O’Neal and Martha Stewart to boost blank-check companies this year left investors mostly in the red.
Just about the nicest thing you could say about celebrity-backed special-purchase acquisition companies and the firms they brought public is that they’ve lost less for investors than benchmarks for the whole SPAC category. After that, things get ugly: 21 out of 33 SPACs tied to famous public figures have posted negative returns for 2021.
Not counting the SPAC tied to former President Donald Trump, which minted a phenomenal gain of more than 400%, the rest of the group averaged an 11% drop through Dec. 13, with rapper Jay-Z’s 84% plunge the worst of the bunch. Only two managed gains of more than 10%, trailing far behind the S&P 500’s 24% rally.
It’s a stark and expensive lesson: While an A-list person can attract attention for a blank check company amid a $155 billion glut of new offerings, it hardly ensures superior returns.
“Celebrities are eye candy, unless there’s really good reasoning to have them on board,” said Matt Tuttle, whose Tuttle Capital Management runs a bevy of exchange-traded funds holding SPACs and firms they’ve merged with. “At some point these companies need to deliver on a real mission, and it becomes less about the marketing and more about the strategy.”
Star-struck investors might agree after the sector’s horrific showing this year. The De-SPAC Index, a group of 25 companies that went public by merging with a SPAC, is down more than 40% through Dec. 13. The IPOX SPAC Index, a basket of 50 de-SPACs as well as SPACs that haven’t found a partner, slumped 16%.