What happened to all these SPACs? Earlier this year, special-purpose acquisition companies became the darling of the market—a sign that stocks are brewing a bubble. These "blank check" companies attracted investors looking for quick and easy windfalls and began to echo the IPO boom and bust of 2000. Nowadays? puff! Leaving aside the new deal of former President Trump, SPAC has almost disappeared due to the outbreak and regulatory difficulties. Not surprisingly-SPAC has never had market magic. However, if viewed correctly, they do help predict the future of stocks. This is why their shift is actually bullish.

First, SPAC is not new. Their history can be traced back to 1993, when they emerged in the United States as a more regulated alternative to replace the rough "blind pool" prone to pumping and dumping schemes. The first SPAC-Information Systems Acquisition Corp-raised only $12 million. For 27 years, SPAC has been a fringe investment until the end of 2020, which brought US-driven prosperity. Why? These shell companies conduct an initial public offering (IPO) and then acquire a private company. Look! Their goals are made public-low cost and significantly reduced regulatory hassles. Many people think that these IPOs are quick money and make SPACs shine. Unfortunately SPAC investors can even redeem their initial funds before the SPAC merger-interested!

After raising 14 billion U.S. dollars globally in 2019, the SPAC IPO soared to 81 billion U.S. dollars in 2020. Then the craze began. In the first quarter of 2021 alone, they raised 95 billion U.S. dollars, accounting for almost half of the total global IPO proceeds. From August 1st to mid-February 2020, US SPAC stocks rose 92%, surpassing the 20% of the Standard & Poor's 500 Index. It has a sense of the emergence of the euphoric bubble that usually occurs before the peak of the global market—like the blind IPO frenzy in early 2000.

now? The light of SPAC faded quickly. High-profile bankruptcies exposed low-quality acquisitions. The much-hyped electric car companies Lordstown Motors and Nikola both went bankrupt on fraud charges. Hundreds of SPACs have yet to find a suitable acquisition target, and there are more deal failures in the headlines than completed mergers. According to standard SPAC regulations, if many SPACs cannot close a deal soon, they must return cash to shareholders. Legal and regulatory dilemmas are also imminent. The goal of U.S. legislators is SPAC, and about 15% of U.S. securities class actions involve them. In the past six months, the total global SPAC IPO proceeds plummeted to 33 billion U.S. dollars-only less than in March! In the third quarter, shareholders redeemed more than half of the initial SPAC investment. SPAC stock fell.

These dilemmas echo what I have said since the publication of the book "Wall Street Waltz" in 1987: IPOs actually represent "possibly overpriced". SPACs are not special-they are just IPOs. Companies go public when the price is good for them-and therefore bad for buyers. IPOs almost always benefit creators, not ordinary investors. Hedge funds and other early-access institutions may win. But retail investors who dream of "the next big thing" buy high later and usually lose. With SPAC, investors trust the sponsor and can find business without even disclosing the target. The companies they buy are usually not ready to go public, but will gnash their teeth when they get huge amounts of money. The quirky rules provide early investors with warrants that can be exercised after the initial funds are redeemed. Even if the stock price soars, shareholders' shares will be diluted as hedge funds exercise these warrants.

But SPAC can still provide you with advantages. how? Think of them as emotional measures. IPO frenzy has historically been a sign of the stock market's prosperity-it has brought unfulfilled expectations and brought negative shocks to the bull market. I am not just referring to the year 2000. The IPO peak, if large enough, indicates that the market peak has a long history. In The Wall Street Waltz, I wrote that the record release in 1986 was a warning. The 1987 crash and bear market followed closely. The SPAC bubble at the beginning of 2021 seems to be another emerging case of IPO issuance, a sign of emerging excitement. However, it never fully bloomed. Die on the vines!

The same is true for sudden euphoria. Yes, Trump's deal reignited some of the sparks of SPAC-triggering a double dangerous combination of IPO greed and political prejudice. But like anything related to Trump, it provokes as much disgust as love. Other than that, there is almost no enthusiasm. The focus of talking about the relaunch of SPACs in Asia is not getting rich quickly, but overheating preemptively. The proposed rules in Hong Kong feature a minimum fund-raising target, prohibiting retail investors from buying before the merger, and requiring promoters to have extensive experience as money managers or senior managers in large listed companies-this is hardly an ecstatic get rich quick Elements of the plan. Singapore's move to allow SPAC in September? Mainly to boost the sluggish IPO scene and prevent domestic start-ups from escaping overseas. There is no bubble either.

If the SPAC fever finally reignites, please be aware-this will be a sign of global emotional overheating. However, for now, doubts are welcome. This is part of the general rising fear check expectations I wrote in my Real Clear Markets column on September 24. 

This is a sign that sentiment has rested and is falling again, laying the foundation for positive surprises that have pushed the stock market higher. Ignore those who see the sinking SPAC as a warning. The bubble is a warning. Its absence is a signal that shows that the world stock market has more room to operate.