Exclusive: UBS imposes SPAC restrictions on wealthy customers

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Earlier this month, UBS (UBS) A person familiar with the matter decided on CNN Business that its wealth management clients will only be able to trade SPAC shares 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 operational business, just 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 offers. 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).

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UBS’s SPAC restrictions come as some experts, including former Federal Reserve officials and famed investor Jeremy Grantham, worry that the blank check boom is being exaggerated. U.S.-listed SPACs have already raised more money this year than in all of 2020, and the first quarter of the year hasn’t even ended.

“If you look at the SPAC market, there are some really attractive new companies and new technologies coming to market that are financing effectively,” Rick Rieder, BlackRock’s director of global fixed income investments, told CNN Business 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

Celebrities like Alex Rodriguez, Jay-Z and Ciara Wilson have ceded their star power to the SPAC in recent months.
The SEC issued a warning last week urging 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.
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Big banks, including UBS, are taking advantage of SPAC’s mania. 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 book broker of 22 SPAC 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, along with Citigroup, of Bill Ackman’s SPAC, which 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 is actively hiring in this booming part of the capital markets business. One week ago, the company listed a position on LinkedIn for a New York-based investment banker focused on SPACs.
Martin Blessing, the former co-chair of UBS Global Wealth Management, reportedly launched earlier this week a SPAC 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.

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