London stock exchange boss sounds the alarm on SPAC ‘froth’

London stock exchange boss sounds the alarm on SPAC ‘froth’

LONDON “” Special purpose acquisition companies, or SPACs, are showing signs of "froth" in the U.S. “” and that doesn't bode well for investors, the boss of London's stock exchange warned Friday. 

"There has been some recognition of the froth in the U.S. market," London Stock Exchange Group (LSEG) CEO David Schwimmer told CNBC's "Squawk Box Europe."

"I think it's important that investors, regulators, market participants use SPACs appropriately," he said.

Excess in the U.S. SPAC market "could end poorly" for investors, Schwimmer told reporters later in the day, according to Reuters.

SPACs are shell companies that raise funds in a public offering to take a privately-held firm public via reverse takeover. They've become an increasingly popular route for some firms “” particularly those in the tech sector “” looking to list their shares.

Last year, U.S.-listed SPACs raised a total of $78.2 billion across 244 IPOs, according to data from Refinitiv. They've already raised more than half of that just two months into 2021.

There are growing worries about highly speculative investing in Wall Street's hottest new vehicle. A leisure-focused SPAC recently did a biotech deal, while a cannabis blank-check firm merged with a space company.

The CEO of Goldman Sachs “” one of the biggest