Remember the SPAC Craze? More Than a Third of Them Have Liquidated Since 2020

New research from SPAC Track, an independent monitor of the SPAC market, suggests that the craze was ill-fated for more than a third of the companies that made the jump: Of the 986 U.S. SPACs that have IPO'd since 2020, 362 have liquidated, according to the research shared exclusively with Inc. 

As low interest rates and surging public markets set the temperature during the pandemic, investors sought an opportunistic approach, and SPACs became a lucrative fad between 2020 and 2021. This backdoor route -- when a public holding company is created with the sole purpose of acquiring a private company and taking it public -- accounted for 613 IPOs, or 59 percent of all new listings in 2021, according to Nasdaq.

Since the SPAC craze kicked off in 2020, 500 companies have successfully "de-SPAC'd," or closed mergers to trade on the public market, SPAC Track found. When the markets were surging, SPACs were attractive, partly due to their speed of approval: A SPAC can be finalized within three to six months, whereas a traditional IPO might take up to 18 months, the multinational consultancy KPMG notes in an explainer on the topic. There is also less regulatory oversight involved with SPACs. 

But the SPAC boom has produced some high-profile casualties. These include WeWork, which filed for bankruptcy last year, and genetic testing platform 23andMe, which went public via SPAC in June, 2021, but has floated plans to go private again. Donald Trump's social-media network, Truth Social, also used the instrument to go public this year as Trump Media and Technology Group. The IPO gave the financially sputtering operation -- and the former president -- a capital injection worth billions on paper. It's trading under the ticker "DJT." 

Trump's SPAC in one of the most prominent to have emerged this year, but overall the herd is thinning. The decline indicates that companies are wary of the public markets, as many would-be IPO candidates offload shares to investment banks and retail investors through independent funds. There have been 19 SPAC liquidations this year, including holding entities such as Nocturne Acquisition Corporation and Northern Star Investment Group. There have been 37 closed mergers or "deSPACs" so far in 2024. 

SPAC Track collects data through a variety of sources, including its native Application Programming Interface that monitors real-time market data, in addition to SEC filings, company press releases and news stories, says Nick Gershenhorn, who created the tool in 2020. "There's been an insane amount of liquidations -- more than anything else. That's how the SPACs have been, quote-unquote 'closing.' By closing their doors instead of shifting into a deSPAC," he tells Inc. 

The SPAC market began its descent in 2022, when 146 SPACs were liquidated, says Gershenhorn, who founded the financial markets intel platform CommonFi specifically to monitor the SPAC bonanza. A further 196 closed their doors last year compared with 98 and 37 closed mergers in 2022 and 2023, respectively, the data shows.