Well, that didn’t last long. A little over a year ago, investors were lining up around the block to invest in SPACs. Banks were scrambling to get in on the fee-making feeding frenzy. But today, everywhere you look, banks are bidding a hasty retreat from cash-shell raisings.

Citi, which underwrote more SPACs in 2021 than any other bank, raking in more than US$440 million in revenue, reversed course a few months ago. The four SPAC IPOs it advised in 2022 suffice to rank Citi third in Dealogic’s league tables, but the bank has not underwritten a new SPAC listing since February. If rumors are to be believed, it has put the practice on hold.

Likewise, after taking 42 SPACs public in 2021, Morgan Stanley appears to have ended its involvement in their issuance in 2022, according to a review of Dealogic data. The last US SPAC the bank took public was Pearl Holdings Acquisition in December. Pearl Holdings is just one of three SPACs that Morgan Stanley ran books for in H2 2021. The bank took 39 SPACs public in H1 2021 and netted more than US$203 million in fees over the year.

JPMorgan has only taken two SPACs public in 2022. It ran books for Sound Point Acquisition in March and Cartica Acquisition in January. Last year, the bank took 38 SPACs public, generating US$142 million in revenue. This year, it has netted around US$6 million from its two transactions.

Barclays—which underwrote 45 SPAC IPOs in 2021—has also fallen out of the top 10 in Dealogic’s league tables. The bank has only advised one such listing in 2022.

Unlimited liability

The market’s change of heart comes after US regulators clamped down on SPACs over the past 12 months, proposing stricter oversight and making it easier for shareholders to sue over false financial projections.

More recently, the US Securities and Exchange Commission (SEC) signaled that banks underwriting SPAC IPOs may also be held liable for the acquisitions their clients subsequently execute. This has prompted banks to pump the brakes.

Earlier this month, Bloomberg reported that Goldman Sachs is severing ties with most of the SPACs it took public and pausing new US SPAC issuance until further notice.

Credit Suisse last month was rumored to have set up a committee to review pending de-SPAC transactions it was advising. Last year, the bank underwrote the fourth most SPACs in the US, netting nearly US$243 million in revenue. This year, the bank isn’t listed on Dealogic’s league tables at all.

Until there is greater clarity on the liability that banks may face, they will be giving blank-check companies a wide berth. And if the SEC confirms bookrunners will be on the hook for inflated promises, SPACs’ best days may already be behind them.

2021 SPAC IPO bookrunners by revenue

2022 (YTD) SPAC IPO bookrunners by revenue