MW SPACs are back with a vengeance. What could possibly go wrong?

By Ciara Linnane

Also known as a blank-check company, the vehicle is still seeing high redemptions and poor postmerger returns

SPACs appear to be back.

Special-purpose acquisition companies, also known as blank-check companies, are currently headed for a four-year high, with 12 deals pricing so far this year and 17 initial filings submitted, according to Renaissance Capital, a provider of institutional research and IPO exchange-traded fund analysis.

That's a big jump from the same time a year ago, when three SPACs had priced and three had filed, and it puts the sector on track for its biggest start to a year since 2019, at the time a record year for the alternative to initial public offerings.

SPACs are shell companies that list on exchanges and then have up to two years to acquire a business or businesses, which then become public companies. They became highly popular during the pandemic years as a way for a company to go public relatively quickly and without the paperwork and regulatory requirements associated with traditional IPOs.

The trend quickly dissipated as the world came out of the pandemic and as many SPACs failed to find a suitable acquisition target and were forced to return the money they had raised to investors.

"Overall, the space is still plagued by high redemptions and poor post-merger returns, and most de-SPACs are underwater," Renaissance said in commentary. "Only 15% of mergers from the past five years trade above the $10 offer price (or split adj. equivalent)."

So if SPACs rank as poor investment vehicles, why are they suddenly showing signs of life?

It's likely because of the tailwinds in hot areas of the market such as quantum computing, fintech and cryptocurrency, not to mention the technology du jour, artificial intelligence.

"While SPAC sponsors risk losing their upfront capital, rising returns for growth stocks and roaring demand for AI may have persuaded more sponsors to have a SPAC ready in case an early-stage AI company wishes to list quickly," Renaissance said.

Last week alone, three SPACs went public and four filed initial paperwork, according to SPAC Research, a data and analysis provider.

Maywood Acquisition Corp. (MAYAU) raised $75 million and said it would focus on general and global businesses. Artius II Acquisition Inc. $(AACBU)$ raised $200 million with a focus on technology and global businesses.

Archimedes Tech SPAC Partners II Co. raised $230 million and said it would also look for technology and global companies.

Overall, 30 IPOs have priced so far this year, up 57.9% from the same time a year ago, according to Renaissance. Total proceeds raised come to $6.6 billion, up 13.8% from a year ago.

Meanwhile, 37 deals have been filed so far, up 27.6% from a year ago. The 12 SPAC deals are the most for any sector, according to Renaissance.

The Renaissance IPO ETF IPO is up about 22%, matching the S&P 500's SPX gains.

From the archive: The SPACsplosion is about to become a liquidation frenzy - and that may be for the best

-Ciara Linnane

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February 18, 2025 11:05 ET (16:05 GMT)

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