Company Insiders Made Billions Before SPAC Bust

Many executives claimed during the boom that SPAC mergers were a better way for companies to go public than traditional initial public offerings.
Many executives claimed during the boom that SPAC mergers were a better way for companies to go public than traditional initial public offerings.


  • Executives and early investors sold shares worth $22 billion

The SPAC boom cost investors billions. Insiders in the companies that went public were on the other side of the trade.

Executives and early investors in companies that went public via special-purpose acquisition companies sold shares worth $22 billion through well-timed trades, profiting before share prices collapsed.

Some of the biggest winners were Detroit Pistons owner Tom Gores’s investment firm Platinum Equity, British billionaire Richard Branson and convicted Nikola founder Trevor Milton. They were among many insiders who got shares on the cheap and sold them as they rose in value, according to a Wall Street Journal analysis of insider-trading disclosures associated with more than 200 companies that did SPAC deals.

Companies that went public this way have lost more than $100 billion in market value. At least 12 have filed for bankruptcy and more than 100 are running low on cash, battered by higher interest rates and rising costs.

Many executives claimed during the boom that SPAC mergers were a better way for companies to go public than traditional initial public offerings. “It’s easy to understand why executives at the companies went with this option," said New York University Law School professor Michael Ohlrogge, who studies SPACs. “It wasn’t because it was a better financial technology—it was because it was just better for them."

The Journal analyzed more than 460 companies that did SPAC deals and identified 232 with insider sales based on a review of Securities and Exchange Commission filings submitted through May 18. The analysis focused on disclosures made by investors who own more than 10% of a company and corporate officers and directors.

Of those with sales, insiders at 12 companies cumulatively sold shares worth at least $500 million. Insiders at about 80% of the 232 companies sold shares valued at less than $100 million, the Journal’s analysis shows. On average, insiders sold about $22 million of shares each.

One of the biggest paydays went to Platinum Equity. The private-equity firm sold shares of four companies that it had invested in before they went public via SPAC deals, generating some $2.3 billion in proceeds. Platinum Equity and Gores declined to comment.

Platinum’s biggest haul came from selling the stock of Vertiv Holdings, a vendor of data-center infrastructure that was owned by Platinum before going public in 2020 through a $5.3 billion deal with a SPAC backed by Goldman Sachs.

As Platinum was selling stock in 2021 for between $20 and $25 a share, five pension funds were buying. In February 2022, Vertiv’s share price fell 37% on a single day, to $12.38, after the company announced disappointing financial results that one Deutsche Bank analyst described as “shockingly bad." The pension funds collectively lost nearly $2.4 million.

The pensions filed a lawsuit last year alleging Vertiv’s management issued misleading earnings guidance. Most of the pensions’ losses were realized by the Louisiana Sheriffs’ Pension & Relief Fund, which spent more than $2.6 million on shares and eventually sold about half of those holdings at a loss, court records show.

“We strongly disagree with the premise of the suit and have meritorious defenses," a Vertiv spokeswoman wrote via email. The Louisiana pension fund and others declined to comment.

Vertiv shares now trade at around $20, down from an all-time high of more than $28 in 2021 but still above the SPAC’s original $10 listing price. That isn’t the case for many other companies that saw sizable insider selling, including space-tourism company Virgin Galactic.

Branson, the company’s founder, sold nearly 75% of his shares for more than $1.4 billion before launch delays and high costs sent the stock down more than 90% from its all-time high and about 60% below the SPAC’s listing price. The proceeds of Branson’s sales were used to shore up his Virgin Group, whose travel and leisure businesses were battered by the pandemic, a spokeswoman said. Branson is still Virgin Galactic’s largest shareholder.

Venture capitalist Chamath Palihapitiya, head of the SPAC that took Virgin Galactic public, made $310 million from selling shares of the company, filings show. He has also spent $144 million to purchase shares and exercise options.

The former Facebook executive became known as the “SPAC King" for the hundreds of millions he made during the boom across deals like Virgin Galactic and personal-finance app SoFi Technologies. A spokesman for Palihapitiya declined to comment. SPAC executives receive ultracheap shares for taking companies public that increase their returns.

Also called a blank-check company, a SPAC is a shell firm that lists publicly with the sole intent of merging with a private company to take it public. After regulators approve the deal, the company going public replaces the SPAC in the stock market.

Insiders made more than $200 million at many other startups that merged with SPACs, including fuel-cell truck upstart Nikola, self-driving car technology maker Luminar Technologies and online gaming company Skillz.

Much of Nikola’s roughly $450 million in share sales went to founder Trevor Milton, who resigned from the company amid allegations of fraud in September 2020. The next year, Milton sold about $374 million of stock for a weighted-average price of about $11. He was convicted of securities fraud last October. Shares have since dropped below $1. A Nikola spokeswoman declined to comment.

Luminar is led by 28-year-old chief executive Austin Russell, who recently led a bid to acquire business-media outlet Forbes. It went public through a SPAC backed by private-equity billionaire Alec Gores, the brother of Platinum Equity’s Tom Gores.

Russell took in $220 million selling some of his Luminar shares in July 2021 at a price of $21 a share, filings show. The sale was to institutional investors in a private placement, a spokeswoman said. On Friday, Luminar shares closed at $6.68. Russell also paid $31 million to buy shares in 2022 and 2023, at an average cost of $6.81 per share. Russell’s compensation is tied to the stock’s performance.

Two of Alec Gores’s SPACs took companies owned by his brother’s Platinum Equity public, and the Gores brothers recused themselves from negotiations. Insiders have made about $700 million in sales from one of those companies, Verra Mobility, a technology provider for fleet management. Tom Gores’s Platinum Equity accounted for most of those sales. Verra is another rare case where the stock has risen after its SPAC deal.

“These company owners were aware the valuation the SPAC was giving them was exceptionally generous," Ohlrogge said. “It’s a no-brainer to take advantage of that."

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