Investor Redemptions Slam A-Rod's SPAC

As the industry fizzles, investors are opting to swap their stock for cash at a blank-check company led by former New York Yankee Alex Rodriguez.

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A-Rod Corp., the special-purpose acquisition company formed between Rodriguez's investment firm A-Rod Corp. and hedge fund Antara Capital LP, said last week that approximately 61% of its 57.5 million shares had been redeemed after investors approved an extension of the deadline for the SPAC to find a buyer. 

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Due to its smaller fund, the SPAC could have trouble finding targets in sports, media, entertainment, health and wellness, and consumer technology. Investors' redemption requests would leave the SPAC with about $224 million, a sharp drop from the $575 million it raised two years ago. 

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In 2021, its talks to merge with Panini SpA were said to have collapsed after the maker of sports cards, stickers, and other collectibles lost its exclusive licenses related to the National Basketball Association and the National Football League, Trade Algo reported.

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As investors pull their money out of the once-hot SPAC industry and bail on sponsors searching for deals, while other backers opt to shutter formerly ambitious projects, the once-hot SPAC market continues to crumble. Some of the biggest names in the industry have shut down their operations as of late, including SPAC titan Alec Gores and former NFL quarterback Colin Kaepernick, who has turned activist. 

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There is a reason that SPACs are often referred to as blank checks because they raise money through IPOs with plans to merge with an unidentified company in the future. It is possible for investors to redeem their investment if they are not happy with the deal within a short period of time, and they can buy something or return the cash. It is possible for management teams to get short extensions to find and close deals, but they have to get shareholder approval and will often have to pay their investors to do this. 

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The industry has struggled to get deals done due to rampant redemption rates, with newly public firms receiving far less money than they expected. Stocks of companies that have gone public through SPAC mergers this year have lost more than 45% of their value.