The stock market was under pressure on Wednesday, with the S&P 500 modestly lower and the Nasdaq Composite down by more than 1% ahead of the Federal Reserve's latest interest rate decision and projections.
However, one SPAC was a big underperformer. Shares of Fintech Acquisition Corp V (FTCV 0.10%), which recently announced its intention to take multi-asset brokerage platform eToro public, were sharply lower. As of 11:30 a.m. EDT, shares were down by more than 13%.
The news of eToro's pending SPAC acquisition broke early Tuesday morning, so that's not what's fueling today's move. Rather, there are two likely explanations.
First, there is significant pressure on highly valued tech-focused stocks today, and eToro certainly qualifies. The SPAC merger values eToro at more than $10 billion, which is about 17 times the platform's 2020 revenue. I mentioned the tech-heavy Nasdaq was significantly underperforming the S&P 500, and many popular high-growth tech stocks are down by more than 5% today.
Second, it's important to put today's move into perspective. Shares of Fintech Acquisition Corp V soared by about 45% yesterday after the merger was announced, so this is a relatively small pullback. Even after today's decline, the SPAC is up by about 26% since we learned eToro was its target.
SPACs like Fintech Acquisition Corp V are often volatile in the days after announcing their acquisition target as investors digest the news. And with rising interest rates putting pressure on virtually all tech-focused companies, it's not surprising that today's direction is downward.