- Jim Chanos slammed SPACs for deceiving investors in a recent interview with the Financial Times.
- The hedge fund manager revealed he’s shorting several SPAC companies with “silly” valuations.
- “As the boom has gone on, we suspect that more and more companies are playing . . . fast and loose with their projections,” he said.
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Legendary short-seller Jim Chanos slammed special purpose acquisition companies for deceiving investors in a recent interview with the Financial Times.
The Kynikos Associates founder also revealed that he’s shorting several SPAC companies that are “very bad businesses” with “silly” valuations. He declined to name the SPACs to the Financial Times. Kynikos did not immediately respond to Insider’s request for comment.
“You’re seeing all kinds of situations now that probably wouldn’t pass muster in the IPO process that are coming public via the SPAC machinery,” said Chanos. “As the boom has gone on, we suspect that more and more companies are playing . . . fast and loose with their projections in order to entice investors to commit capital.”
Unlike traditional IPOs, blank-check companies can show projected revenue numbers to get valued off their future earnings. SPAC sponsors argue that the projections are important for investors, especially when target companies are unprofitable startups, but investor advocates argue they are frequently too optimistic or misleading.
The US Securities and Exchange Commission is looking into reforming regulations around lofty projections SPACs are allowed to make. Chanos said the US regulator should intervene, because the projections are where “investors get stars in their eyes and are prone to losing a lot of money.”
His criticism comes as certain high-profile SPAC stocks have been battered by reports from short-sellers. Lordstown Motors, for instance, has dropped nearly 42% since going public via a blank check company in October. The electric vehicle start-up is under attack from Hindenburg Research, which has accused Lordstown of pumping up preorder numbers to generate investor interest.