“SPAC issuance in 2021 was unsustainable,” Don Duffy, president of ICR, a financial communications and advisory firm with SPAC market expertise, told The Motley Fool. “There were too many SPAC IPOs at a time when asset values were also inflated, which led to many bad deals. 2022-2024 saw the market correct.”
“The 2021 SPAC mania saw way too many IPOs,” Benjamin Kwasnick, Founder of SPAC Research, added. “With a less crowded field and an improvement in the set of outcomes we're seeing from live deals, sponsors are more enthusiastic about coming back to the market,” he continued.
According to Donghang "DH" Zhang, PhD, finance professor at the University of South Carolina’s Darla Moore School of Business, macroeconomic conditions including lower interest rates and pandemic stimulus checks played a major role in the 2020-2021 SPAC surge.
“These market conditions were nearly perfect for riskier companies to go public, especially those with a good story to tell (e.g., EV companies),” Zhang said. “So, we had a surge in SPAC IPOs, as well as traditional IPOs.”
Inflation, tighter monetary policy, and disappointing SPAC IPO returns led to fewer IPOs in the years following, but “The SPAC IPO market is not dead,” Zhang said.
SPAC experts see 2025 as a rebound year for SPAC IPOs, albeit not close to the levels seen in 2020 and 2021.
“The SPAC market is more than alive and well, it’s thriving and robust,” Douglas S. Ellenoff, a securities lawyer who has led hundreds of SPAC IPOs, said. “The number of SPAC IPOs has markedly increased this year versus all of last year. The number of potential targets has also increased. There have been significantly more deSPACs announced this year than traditional IPOs. SPACs have also announced very large crypto reserve transactions that are being very positively received by the market.”
