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SPACs: the financial fashion for these shell companies could spell trouble

The City shouldn’t hurry to match risky innovations taking place across the Atlantic

By Paul Wallace  

Image: robertharding / Alamy Stock Photo

In the past year or so, a new way of bringing private firms to the stock market has become all the rage on Wall Street. It involves—acronym alert—SPACs, short for “special purpose acquisition companies.” The upsurge in SPACs currently has no parallel in the City, owing to regulatory restrictions. Now there are moves afoot to allow London to follow suit. But this is one American financial innovation that Britain can usefully do without.

SPACs have turned on its head the usual process of launching a private company on the stock market in the United States. Traditionally, that has…

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