Executive summary
The number and transaction volume of special purpose acquisition companies (SPACs) has been on the rise over the past few years, although nothing like the heady times of 2020–2021. Deal volume and value are up, but growth is muted and steady.
The past year has seen new initial offerings and closed IPOs, but it’s too soon to know how many may be abandoned or result in liquidations or withdrawals, as opposed to business combinations. But an updated regulatory framework is in place with designs to increase transparency, increase data availability and protect investors, raising hopes that SPAC success rates could improve. Sector focus has also diversified, with a greater focus on cryptocurrency.
SPACs remain an alternative to IPOs
SPACs have long been a part of the financial markets. Previously known as blank-cheque companies with a dubious reputation, SPACs raise capital through IPOs with the purpose of acquiring or merging with an existing operating company. This structure allows a private company to go public by combining with the listed SPAC, providing an alternative route to a traditional IPO. In essence, a SPAC functions as a pre-packaged IPO, where the listing process is already complete, enabling the target company to become public through the business combination.
After a sharp drop post- 2021, SPAC activity rebounds modestly
The SPAC market boomed in 2020, as the traditional IPO market froze amid Covid-19. The sector exploded the following year, with 811 SPACs filed, nearly triple the 325 recorded in 2020. Following that record-setting year, the SPAC surge delivered mixed results and weakened investor confidence due to an oversupply of SPACs and a rush of novice SPAC sponsors. These issues led to a pronounced decline in market activity from 2022 onward. The number of completed IPOs fell sharply to just 48 in 2022, a fraction of the previous year’s total (586).
In 2021, investor curiosity was high, especially among retail investors, and limited market experience meant few questioned the quality or long-term viability of SPACs. However, following the surge in 2020 and 2021 and the disappointing outcomes of many de-SPAC transactions, investor sentiment shifted sharply. Many investors became increasingly skeptical and chose to distance themselves from the SPAC market.
By 2023, SPAC issuance had reached its lowest level in five years, with only 24 completed IPOs and limited merger activity. However, initial offering activity began to rebound in 2025, signaling renewed momentum. While it remains uncertain whether this recovery will evolve into sustained growth, the current trend suggests cautious optimism.
Capital raised via SPACs exceeds pre-pandemic levels
Growing interest in crypto
The composition of SPAC activity by sector highlights shifting investor focus. During the 2020–2021 boom, technology and industrial SPACs dominated issuance, with significant representation from healthcare, financial institutions and consumer sectors. In recent years, however, the industry mix has become more diverse, showing a shift toward carefully chosen targets, including those that are crypto-related.
Of the 76 SPACs that reached the business-combination stage in 2025, 12 were crypto-related. This marks a shift from previous years, when healthcare and technology led investor interest. While both sectors still rank in the top five, their positions have slipped as attention turns towards digital assets. The rise in crypto-related activity suggests that investors are once again willing to take on more risk for potential growth.
The SPACs completion timeline is getting longer
Despite the recent uptick in SPAC initial offerings, the time to complete business combinations has been lengthening. The proportion of SPACs completing mergers within one year of pricing has declined steadily since 2021, while those taking one to two years or more than two years have become more common.
By 2024 and 2025, most SPACs were taking more than two years to reach the post-merger stage, signaling a noticeable extension in the overall SPAC lifecycle even as issuance levels began to recover.
This gradual lengthening of timelines began to emerge in 2023, and it reflects a changing environment for SPAC transactions. These evolving dynamics paved the way for the SEC to introduce updated rules in 2024, which further influenced the structure and oversight of SPAC activity.
Performance comparison between traditional and SPAC IPOs
A central criticism of SPACs is weak post-merger performance. This is clearly illustrated when comparing traditional and SPAC IPOs. Traditional IPOs have outperformed SPAC IPOs across all time horizons, with consistently higher positive-return outcomes and a meaningful proportion achieving returns above 25% alongside sustained representation in the highest return categories.
In contrast, SPACs are heavily skewed toward low or negative returns, with performance deteriorating as holding periods extend. By one year, the majority of SPACs fall into the deepest negative return categories.
Traditional IPOs have produced more consistent and durable returns, while SPACs have generally struggled to deliver similar results. While sponsors and banks earned significant fees, weak post-merger performance hit public investors, leading to increased regulatory scrutiny.
Refreshed regulations boost investor protection and transparency
In 2024, the SEC adopted new rules and amendments to enhance disclosures and provide additional investor protection around IPOs by SPACs and in subsequent business combination transactions between SPACs and target companies (de-SPAC transactions). Key objectives included aligning SPAC rules more closely with those of traditional IPOs through increased disclosure, the use of projections, and more rigorous issuer obligations.
The new regulatory requirements, as stated by the SEC, aim to tackle information asymmetries, misleading information, and conflicts of interest in SPAC and de-SPAC transactions.
Overall, the 2025 SPAC landscape appears more cautious and selective than the 2021 frenzy. As market conditions shift and investor confidence rebuilds, participants should prepare for further evolution in the SPAC market.
From a risk standpoint, SPACs remain an alternative investment class where sponsor and investor interests do not always align, highlighting the need for ongoing regulatory oversight and careful investor attention.
