Special purpose acquisition companies, or SPACs, were a huge trend in finance for for several years. SPAC issuance topped its record 2020 total in the first three months of 2021, making up about 50% of the total U.S. IPO market. But in the second half of the year, they began to lose steam.

The market became oversaturated with SPACs, an alternative to a traditional IPO, and this drew skepticism as well as regulatory attention the from U.S. Securities and Exchange Commission (SEC). And SPACs typically target early-stage companies going public, and that “only heightens the risk,” according to Bloomberg Law.

Take for instance Latch, Inc. (Nasdaq: LTCH), a software-as-a-service company that went public via a SPAC in June. The company’s stock finished 2021 down 26%. Latch recently announced it is undergoing an “operational evolution,” which includes the departure of CFO Garth Mitchell. He is leaving the company “to pursue other opportunities,” and his last day is May 10, according to the press release. Effective immediately, Barry Schaeffer, SVP of finance, will assume Mitchell’s duties as interim CFO. The company has launched a search for Mitchell’s permanent replacement.

“I think it’s natural to see backlash and management shake-ups after a rapid decline in the stock price, which is obviously the case for many SPAC listings right now,” Matt Kennedy, a senior strategist at Renaissance Capital, a global IPO investment advisory firm, told me.

Latch declined to comment beyond their announcement. Although other changes afoot include Ali Hussain remaining COO, but stepping down from an additional role as executive officer and principal operating officer. And Junji Nakamura is assuming a new role as chief accounting officer.

When a public listing is unsuccessful, does that burden fall on the CFO? “Financing is the realm of the CFO, so I can see why that position is singled out when the finger-pointing starts,” Kennedy explains. “However, I don’t think the buck necessarily stops with the CFO. For a decision as large as a public listing, the CEO and the rest of the board of directors are responsible for making the final decision.”

But finance chiefs are taking notice of the downfall of SPACs, says Reena Aggarwal, Ph.D., director of the Georgetown University McDonough School of Business Center for Financial Markets and Policy. “CFOs have already become more cautious in using the SPAC option,” Aggarwal says. “At the end of the day, CFOs want to raise capital in a cost-effective way.”

In addition, coming regulation from the SEC on SPACs may further evaporate whatever enthusiasm is left. The proposed rules, announced on March 30, will “put SPACs on a similar footing to traditional IPOs for liability purposes,” David Crandall, a Hogan Lovells capital markets partner in the New York office, told me. “One of the key advantages to going public by SPAC has been the ability to disclose projections, but this has put enormous pressure on management teams, and CFOs in particular.”

Crandall continues, “Making good faith, reasonable projections several years into the future is not easy. The SEC rules will almost certainly result in companies no longer publicly disclosing projections.” His prediction? Companies and CFOs will gravitate back to traditional IPOs.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

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