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Misconduct in the SPAC market: Evidence from venture capital exits

Author

Listed:
  • Groh, Alexander Peter
  • Proelss, Juliane
  • Sannajust, Aurélie
  • Schweizer, Denis

Abstract

This paper investigates the performance of venture capital-backed (VC-backed) firms upon their exits through mergers with special purpose acquisition companies (SPACs) or “more traditional” initial public offerings (IPOs) during the recent SPAC wave. Compared to their IPO peers, VC-backed ventures merging with SPACs tend to exhibit smaller size, less current and analyst-projected future profitability, and additional characteristics that indicate lower venture quality. Notably, SPACs merging with VC-backed ventures demonstrate significant underperformance relative to both SPACs merging with non-VC-backed companies and “standard” IPOs. This suggests that VCs may have exploited a relative lack of regulation and investor naivety. They may have presented their lower-quality ventures as appealing opportunities for mergers with SPACs, which resulted in their substantial underperformance.

Suggested Citation

  • Groh, Alexander Peter & Proelss, Juliane & Sannajust, Aurélie & Schweizer, Denis, 2025. "Misconduct in the SPAC market: Evidence from venture capital exits," Journal of Corporate Finance, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:corfin:v:93:y:2025:i:c:s0929119925000604
    DOI: 10.1016/j.jcorpfin.2025.102792
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    More about this item

    Keywords

    Exit; IPO; Market misconduct; SPAC; Venture capital;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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