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).
“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
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.
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.
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