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Exclusive: UBS quietly bans advisers from pitching booming SPACs to clients




Earlier this month, UBS (UBS) A person familiar with the matter decided on CNN Business that its wealth management clients could trade SPAC shares only unsolicited.

In other words, UBS advisors are not allowed to call their wealthy clients to encourage them to buy or sell specific SPACs that are listed on the open market. Once the new merged entity is made public, UBS advisers will be allowed to distribute the shares.

A UBS spokesman declined to comment.

The person familiar with the matter made the decision, due to the limited availability of information and research on SPAC before they merged with private companies.

Some SPACs “don’t make sense”

In fact, little is known about SPACs until they determine which company they will use to make it public. SPACs have no operating companies, only a blank check and a management team looking for the right candidate for the merger.

SPAC restrictions on UBS do not extend to SPAC IPO offerings. UBS financial advisors can still review these so-called primary SPAC deals with eligible clients on deals where UBS is an IPO subscriber, the person said. (Private banks like UBS usually offer these deals to wealthy clients with a net worth above a specified level).

UBS SPAC restrictions come according to some experts, included former Federal Reserve officials i the famous investor Jeremy Grantham, worry that the blank verification boom has become too much. U.S.-listed SPACs have already raised more money this year than in all of 2020, and the first quarter of the year isn’t even over.

“If you look at the SPAC market, there are some really attractive new companies and new technologies coming to the market that they fund effectively,” Rick Rieder, BlackRock’s global fixed income investment director, said this week. “And then there are those that make no sense.”

Rieder expressed concern about how some SPACs will be able to become the high multiples they are getting. “You have to be very selective about where you’re going and not just jump on that train because it’s gone crazy,” he said.

Big banks like UBS are charging

Famous people like Alex Rodriguez, Jay-Z and Ciara Wilson have ceded their star power to the SPACs in recent months.
He SEC issued a warning last week he urged investors not to buy SPAC simply for the participation of a celebrity. “Celebrities, like anyone else, may be attracted to a risky investment or may be better able to bear the risk of loss,” the SEC said.
Don’t invest in a SPAC just to get a celebrity involved, the SEC warns

The big banks, including UBS, are facing the fashion of the SPAC. Investment banks receive commissions in exchange for finding buyers of SPAC shares and putting a flat below their share price. These rates aren’t as high as Wall Street companies do for traditional IPOs, but the sheer volume of SPAC deals have helped offset that.

UBS was the largest subscriber or broker of 22 SPAC books listed in the United States last year, sixth among the top Wall Street companies, according to Dealogic. The Swiss bank was one of the main subscribers, together with Citigroup, for SPAC by Bill Ackman, Which one raised $ 4 billion last July and is still looking for a candidate for the merger. UBS has led another 15 SPACs so far this year, according to Dealogic.
UBS actively hires in this booming part of the capital markets business. A week ago, the company included a position on LinkedIn for a New York-based investment banker focused on SPACs.
Martin Blessing, former co-chair of UBS Global Wealth Management, reportedly launched an SPAC earlier this week aimed at buying a financial technology company.

It is unclear whether other large banks are imposing similar restrictions. Wells Fargo declined to comment, while representatives of firms such as Goldman Sachs, Bank of America and JPMorgan did not respond to inquiries.