In other words, UBS advisers are not permitted to call their wealthy clients to encourage them to buy or sell specific SPACs trading on the open market. Once the newly merged entity has gone public, the UBS advisers will be allowed to pitch the stocks.
A UBS spokesperson declined to comment.
The decision was made, the person familiar with the matter said, because of the limited availability of information and research on SPACs before they merge with private companies.
Some SPACs ‘make no sense’
Indeed, little is known about SPACs until they determine what company they will target to bring public. SPACs don’t have operating businesses, just a blank check and a management team hunting for the right merger candidate.
The SPAC restrictions at UBS do not extend to SPAC IPO offerings. UBS financial advisers are still able to review these so-called primary SPAC offerings with eligible clients in deals where UBS is an underwriter of the IPO, the person said. (Private banks like UBS typically only offer these deals up to wealthy clients with net worth above a specified level.)
“If you look at the SPAC market, there’s some really attractive new companies and new technologies coming to the market that are financing effectively,” Rick Rieder, BlackRock’s chief investment officer of global fixed income, told CNN Business this week. “And then there are some that make no sense.”
Rieder expressed concern about how some SPACs will ever be able to grow into the elevated multiples they are garnering. “You’ve got to be really selective about where you go and not just jump onto that train because it’s gotten crazy,” he said.
Big banks like UBS are cashing in
Big banks, including UBS, are cashing in on the SPAC craze. Investment banks receive fees in exchange for finding buyers for SPAC shares and putting a floor beneath their share price. These fees are not as large as what Wall Street firms make on traditional IPOs, but the sheer volume of SPAC deals have helped make up for that.
It’s not clear whether other major banks are imposing similar restrictions. Wells Fargo declined to comment, while representatives from firms including Goldman Sachs, Bank of America and JPMorgan did not respond to inquiries.