Today, deSPAC company Arrival (NASDAQ:ARVL) is continuing lower, as investors brace for more volatility. As with other firms that came public through blank-check companies, ARVL stock has been hit by extremely bearish market sentiment. But why?
Among the key reasons for this sentiment decline has been mass withdrawals from SPACs, both before and after mergers. Viewed as speculative vehicles for companies that would otherwise raise money from venture capitalists, SPACs surged in 2020 and into 2021 on incredible momentum.
However, momentum has died down. Indeed, as we’ve seen with other sectors such as crypto, this isn’t a good thing. Sentiment plays a big role in determining the valuations of these early stage companies. With Federal Reserve interest rate hikes on the horizon, investors are cautious right now.
Let’s dive into what other factors may be driving this sentiment among companies like Arrival.
ARVL Stock Plummets As SPACs Move Out of Favor
It’s worth noting the extent of Arrival’s decline. Since peaking at nearly $30 per share early last year, shares have sunk to as low as $3 today. That marks a fresh low, and declines of nearly 90% from its peak.
Various pundits have picked up the criticism of SPACs. Among the highest-profile detractors right now is Jim Cramer.
Take the market back from the SPACs… These are play toys for the rich. Don't fool yourself, you are writing the blank check. I won't even write a blank check for my plumber and he's been my plumber for 25 years
— Jim Cramer (@jimcramer) January 26, 2022
Via a series of tweets, Cramer essentially went on a rampage, calling SPACs “toys for the rich” and suggesting he “wouldn’t pay for a SPAC even with Dogecoin.”
Thus far, Cramer has been right. However, given how far these SPACs have fallen lately, there are likely some value investors out there willing to sift through the wreckage.
Will Arrival be one of the companies that rises from the ashes? We’ll see.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
