SPAC Comeback Draws Renewed Interest from Wall Street

They’re SPAC! Just when the market seemed dead and buried, special purpose acquisition companies have risen from the grave.

The re-emergence of the once, maybe still, controversial vehicles that let companies go public outside of traditional IPOs is underscored by strong hints this week that one of yesteryear’s biggest Wall Street underwriters of the blank check firms is once again ready to make deals after bowing out of the space three years ago.

Return of the SPAC

To remember SPACs is to take a time machine back to their golden age of 2021, when the song of the summer didn’t matter because you were at home in pajamas during pandemic lockdowns. That’s when these blank-check companies, which list on public markets in order to later merge with a target company and take it public, were all the rage. There was a time when it felt like there were as many celebrity SPACs  — Martha Stewart, Jay-Z and Shaquille O’Neal each got in on the craze — as there are celebrity tequila brands.

Roughly 600 SPAC deals in 2021 raised a record $163 billion. But a year later, the market froze after interest rates were hiked and the S&P 500 turned in its worst year since the late-2000s financial crisis, falling 19% in 2022. The value of many companies that went public during the SPAC craze crashed, too. They were not helped by the Securities and Exchange Commission stepping in to protect investors. The regulator introduced rules in 2022, finalized two years later, that aligned SPAC disclosure and conflict of interest requirements more closely with the rigorous standards of traditional IPOs. But this year, finally, has marked a mini-comeback of sorts, thanks to maybe the biggest celebrity SPAC figure of all:

• That, of course, would be President Trump, whose Truth Social went public via SPAC merger in 2022. The expectation that Trump and Paul Atkins, his pick for SEC chair, would focus more on capital formation than clampdown has sparked a return to the vehicles: According to SPACInsider data, there have been 58 SPAC offerings so far this year, one more than the total in all of 2024.
• In fact, the most active bank on SPAC deals this year, Cantor Fitzgerald, has deep ties to the Trump administration: Commerce Secretary Howard Lutnick is its former CEO and upon taking his job in Trump’s Cabinet, he handed control to his sons Brandon and Kyle. However, the fuss has been enough to lure back Wall Street’s former titan of the SPAC space: Bloomberg reported earlier this week that Goldman Sachs is prepared to start underwriting SPAC deals again after it largely withdrew from the space in 2022.

The Fine Print: Performance among private companies that went public by merging with SPACs this year has not exactly been spectacular. According to data from ListingTrack on 20 such firms, the median return has been a decline of 74%.