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SPAC Talk

Back to the peripheries. The past two years have seen a significant retreat in investor interest that has all but brought SPACs back to the peripheries of the investing world. Traditional IPOs have been restored as the vehicle of choice for private companies to go public. SPAC IPO famine. Into the final month of the year, 2023 can be best summed up as an acceleration of the negative trends seen in 2022. The SPAC IPO market has shrunk to 29, down from 86 in 2022, and a fraction of the record 613 SPAC IPOs priced two years ago. This year is on track to be the slowest year for SPAC IPOs since 2017, and that’s if the December produces six IPOs, which has only occurred one time this year (February). Liquidations galore. Since the start of 2022, 326 SPACs have been liquidated, returning more than $100 billion to their public Class A shareholders. This year has so far seen a record 190 SPAC liquidations, surpassing last year’s then unprecedented total of 146. Moreover, the 2023 total will expand by at least seven in the remainder of the year, and in all probability, by more. Prior to 2022, SPAC liquidations were a much rarer event, with a total of 87 SPAC liquidations returning $8.9 billion to their public shareholders in the 19 years prior to 2022. Deal flow slows, deal values shrink, terminations soar. Thus far in 2023, 146 new SPAC deals have been announced. It can be predicted with some certainty that by year-end, the total will fall well short of the 196 announced in 2022. At the same time, the average deal value has fallen sharply since 2021 from $2.9 billion at its peak in 2Q21 to $380 million in 4Q23 to date. There have also been several deals abandoned in the last two years, with 61 in 2022 and 69 and counting thus far in 2023. A little more than half the cancellations involve deals that were announced in 2022. Deal completion has fallen sharply from an average of 79% in the decade prior to 2020 to 28% in the 2020-2023 period. De-SPAC woes continue. The decimation of de-SPAC values has continued with the Bloomberg De-SPAC Index (DESPACTR) down 25% YTD, against a 73% plunge in 2022. De-SPACs remain in a high redemption environment and an out-of-favor asset class. Our crystal ball for 2024. This year has been another year of retrenchment for SPACs. There are no immediate signals indicating that a major rebound in 2024 is on its way, but there may be green shoots of a radical remake that could reinvigorate SPAC land. Our SPAC Talk Focus provides a more detailed review of 2023 and what it might take for the SPAC/de-SPAC markets to be re-energize.