ATI Physical Therapy Inc., in its earnings debut as a public company following a merger with a blank-check firm, revised its revenue projections sharply lower and disclosed larger-than-expected staff turnover. But the surprises went far beyond that.
It’s exactly what skeptics of the boom in special purpose acquisition companies have been warning about.
“The release also lacked a share count, a balance sheet, a cash flow statement or, for that matter, a good defense for why the company’s original guidance ever made sense,” Michael Petusky at Barrington Research wrote in a report. “We are shocked by what has unfolded at ATI.” SPACs, which sell shares to raise money and hunt for takeovers, can offer private companies a path to markets without the rigorous scrutiny of a traditional initial public offering. That has prompted a chorus of warnings from financial professionals in recent months that the flood of new SPACs was creating conditions for deals with unsustainable valuations and questionable disclosures.
in February to take ATI public through a merger with Fortress Value Acquisition Corp. II, a SPAC sponsored by Fortress Credit, an arm of Fortress Investment Group.Fortress itself is facing paper losses of about $54 million, including the $9 million in invested capital it injected to form the SPAC, according to people with knowledge of the matter. It was among participants in the private investment in public equity that supported the transaction.
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