The downward spiral of Trump Media’s stock continues, with shares plummeting 10% on Monday to a record low of $12.15. This marks a staggering 30% decline in just five days, with the company’s valuation dwindling from $10 billion to a mere $2.5 billion in just six months. The stock has lost a whopping 80% of its value since its public debut via a special purpose acquisition company (SPAC).
Trump Media’s struggles are not unique, as several high-profile companies that went public via SPAC have faced similar woes. DNA-testing service 23andMe, for instance, has seen its shares nosedive 97% since its public debut, while BuzzFeed’s stock has plummeted to under $3. BurgerFi, which went public via SPAC in 2020, has announced plans to close 19 locations, and its stock has been delisted.
The decline of Trump Media’s stock has put SPACs under intense scrutiny, with many investors questioning the risks associated with this alternative method of going public. While SPACs were all the rage in 2020 and 2021, their popularity has waned due to high-profile bankruptcies and concerns over lack of due diligence.
In response, the Securities and Exchange Commission (SEC) has adopted new rules aimed at increasing transparency and accountability for SPACs. The rules require blank-check companies and their acquisition targets to disclose more about their projected earnings, providing investors with greater protections.
Despite these efforts, SPACs are not yet extinct. In 2024, 39% of total IPOs were via SPACs, although this represents a significant decline from the early 2020s. The SEC remains committed to protecting investors, with Chair Gary Gensler emphasizing the need for “time-tested investor protections” regardless of the method of going public.
As the SPAC landscape continues to evolve, one thing is clear: investors must remain vigilant and do their due diligence when considering investments in companies that have gone public via this alternative route.
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