The SPAC is Back

By: Nathan Li – Director of Investments

Contributing Editor: Caden Warner 

The controversial “blank-check” company, the SPAC, has regained its footing after a disastrous bust in 2021. Is this a good or bad signal to the greater economy?

With significant uncertainty, market concentration in Big-Tech (the Magnificent 7 accounts for more than ⅓ of the S&P 500) and average ~35% first-day IPO jumps, the SPAC is seeing renewed interest. In 2025 so far, there were roughly 104 SPAC IPOs and $21B raised, 3 times the deal count and capital raised by the same time in 2024.

Pessimistic investors often cite the 2020-2021 SPAC boom and bust, but often overlook the underlying strengths of the SPAC structure. They see them as low-quality investment vehicles that rush due diligence, offer easy exits for struggling CEOs, and signal overspeculation. However, SPAC advocates such argue they offer distinct benefits to all parties due to their streamlined structure: they’re lower risk to early investors, who can redeem shares with interest once a target is announced; they allow institutional investors to participate later through PIPE financing with full visibility into the target; and they offer companies with a faster, more efficient route to the public markets. 

Many managing directors now note that the SPAC environment is healthier, “with bankers who have strong track records advising on listings, a steady flow of smaller deals, more realistic valuations, and better-structured transactions.” The SEC’s tougher stance and lingering post-2022 perceptions pushed bulge-bracket banks–many of which suffered enormous losses–out of the space, creating a niche for boutiques. However, with its re-emergence, larger banks are positioning to re-enter the space.

The SPAC resurgence may also reshape investment banking economics. Rather than the traditional IPO model with full fees paid at close, SPACs generate smaller front-end fees of about 2% at IPO and a larger, uncertain backend of roughly 3% or more. Additionally, rising SPAC activity may mean fewer traditional IPOs, shifting workflow toward ECM-M&A collaboration and away from old-school IPO execution.

Whether or not SPACs represent low-grade investments that indicate imminent recession, or benefit the economy by acting as expedited, low-risk IPOs, the revival of SPACs will undoubtedly reshape competition, fee structures, and product-group dynamics within Investment Banking.