Ortenca Aliaj reports on Carson Block’s harsh assessment of SPACs in the Financial Times, writing:
Muddy Waters, the US short seller run by Carson Block, has launched a scathing attack on 2020’s hottest investment phenomenon, the special purpose acquisition company, and revealed it is betting against a company brought to market by former Citigroup dealmaker Michael Klein.
In a report published on Wednesday, Muddy Waters said it had taken a short position in MultiPlan, a healthcare company that went public in an $11bn deal with one of Mr Klein’s acquisition vehicles earlier this year.
Mr Klein has been one of the most prolific sponsors of Spacs, also known as blank-cheque companies, which raise money with a promise to acquire a business looking for a public listing.
The Muddy Waters report was titled “Private Equity Necrophilia Meets The Great 2020 Money Grab” and criticised Mr Klein for taking MultiPlan public after it had been passed from one private equity owner to another. The report said there could be perverse incentives in the Spac model.
“A business model that incentivises promoters to do something — anything — with other people’s money is bound to lead to significant value destruction on occasion,” the report said. “That’s even more true when a Spac buys a business from the fourth consecutive private equity group to have owned it. C’mon, man.”
Read more here.