Activist investors are hunting targets in the SPAC market, but battles won't be easy to win

cnbc.com:

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The once red-hot SPAC market is becoming a fertile ground for activist investors who push for changes at problematic companies and profit from them.

A record number of companies went public over the past two years by merging with special purpose acquisition companies, a fast-track IPO alternative vehicle. New to the public markets and often underperforming, industry experts believe these companies could increasingly become vulnerable to activist involvement.

«It makes sense that they would look at SPACs because oftentimes when the de-SPAC M&A happens, the stock would drop 10% or 15% even in the best of cases,» said Perrie Weiner, partner at Baker McKenzie LLP. «There might be buying opportunities and activists might be able to do well. For SPACs when they first get off the ground, it takes a while to get their feet under them and sometimes the management teams aren't as good as they should be.»

The performance of SPACs after their mergers has been abysmal. The proprietary CNBC SPAC Post Deal Index, which is comprised of SPACs that have completed their mergers and taken their target companies public, tumbled nearly 30% year to date and a whopping 50% from a year ago.

Last month, Dan Loeb took a 6.4% in Cano Health, a senior-care facility operator that merged with billionaire Barry Sternlicht-backed Jaws Acquisition Corp. Third Point's Loeb is pushing Cano to put itself up for sale as investors have «a largely unfavorable view» of SPACs.

Loeb's move marked one of the first times a prominent activist investor has targeted a company that became public through a SPAC, but many expect more to come.

«We know there are several activists evaluating