Is this latest merger Spac era’s worst deal?

The abysmal performance of businesses that have gone public by merging with special purpose acquisition companies (SPAC) has emboldened the US Securities and Exchange Commission to beef up investor protections and disclosure requirements.
Spacs were touted as a shortcut to a stock-market listing and a way for retail investors to gain access to promising start-ups. But the hype and haste have often sidetracked due diligence and financial controls. The promise has given way to losses and, in some cases, lawsuits. An index of 25 companies that became public by combining with a Spac has plummeted more than 75% from its peak in February last year.
When financial historians require a poster child for the Spac boom and bust — echoing Pets.com in the dotcom era — they’ll be spoiled for choice, but may end up nominating View Inc. The “smart-window” manufacturer’s disastrous $1.6 billion merger with a Cantor Fitzgerald-backed Spac illustrates why reforms are long overdue. Already reeling from an accounting scandal that blew up within months of the Spac deal closing in March 2021, View warned it risked running out of cash. The shares extended their decline to 93%, making it the second-worst performing large Spac deal from the past two and a half years. The cast of institutions involved with the company and its ill-fated blank-check transaction — Cantor, Goldman Sachs Group Inc, Softbank Group Corp, Credit Suisse Group AG and the now-insolvent Greensill Capital — reads like a game of tech-bubble bingo.
To recap, View manufactures glass panels with an electrically charged coating that automatically tints when the sun shines, obviating the need for window blinds. The Silicon Valley-based company has racked up around $2 billion of losses since its inception more than a decade ago, and it has negative gross margins — a posh way of saying its smart windows cost more to build than they sell for. Yet the Spac delivered $815 million in gross proceeds, and in November 2020 it confidently predicted View would require “no additional equity capital” before achieving positive free cash flow. However, View said its ability to remain a going concern was in “substantial doubt” because its $200 million of cash won’t last another 12 months. Whoops.
And as View hasn’t filed earnings reports since May 2021, it risks having its shares delisted from Nasdaq at the end of this month. The hiatus stems from View’s disclosure in August of accounting irregularities related to anticipated repair costs. The inaccurate warranty accruals forced the resignation of its chief financial officer in November. The more realistic liability calculation far exceeded the company’s modest annual sales. “Uncovering an issue with the functioning of our finance and accounting organisation is painful,” View’s CEO Rao Mulpuri wrote in a November letter to employees, adding he took “full ownership” of the problems.
The warranty review is complete, and no further material errors have been identified. Yet despite assurances of “substantial progress” the company still hasn’t published restated accounts for 2019 and 2020, nor the accounts for the last four quarters. Whoops again. View did not respond to requests for comment. After sinking more than $200 million into the SPAC transaction, Singapore’s sovereign wealth fund, GIC, must be furious. Retail investors who piled into the stock are also licking their wounds. Not surprisingly, some have filed a class-action lawsuit.

—Bloomberg