SPAC Revival: Largest Monthly Flow of Deals & Proceeds Since 2022

The Return of SPAC

Following a remarkable year in 2021, the SPAC bubble burst due to the high interest rate environment initiated by the Federal Reserve in early 2022. This led to a significant downturn in the SPAC market. However, more than three years later, there are indications of a revival in the black-check market, just as the Federal Reserve is about to commence its interest rate-cutting cycle.

August SPAC Activities

According to Bloomberg data, there was a surge in SPAC activities in August, with $2 billion raised across nine US-listed special-purpose acquisition companies. This is the largest flow of deals and proceeds since the early part of 2022. Among the key players were Avi Katz's GigCapital Global, Howard Lutnick, and Asia casino magnate Lawrence Ho's family office, each of whom priced their own offerings last month.

Key Players in the SPAC Market

Cantor Fitzgerald LP, where Lutnick serves as CEO, has been a significant player in the SPAC space. The company has sponsored at least nine blank-check companies. Among the companies Cantor brought public through SPACs is Rumble Inc., a conservative video network backed by Peter Thiel. On the other hand, Black Spade Acquisition II Co., which raised $150 million, is sponsored by an affiliate of Ho's Black Spade Capital. The firm's first SPAC took Vinfast Auto Ltd. public at a $27 billion valuation last year.

SPAC: An Alternative to IPO

According to Josef Schuster, founder and CEO of IPOX Schuster, an index provider focused on new listings, the SPAC structure is far from being obsolete. He noted that companies are beginning to realize that the traditional IPO may not be suitable for everyone. He added that smaller deals in riskier areas or larger industrial mergers make sense as companies look for a public listing.

Factors Responsible for the SPAC Downturn

Some of the main factors responsible for the SPAC downturn include rising inflation, a high interest rate environment, disappointing performance by newly de-SPACed companies, increased macroeconomic uncertainty, and heightened regulatory scrutiny from the SEC.

SPAC Proceeds on the Rise

SPAC Research data show that SPAC proceeds have been increasing, albeit unevenly, since May. This suggests that financial conditions are becoming more favorable, and companies are gaining more confidence in going public through a SPAC without the fear of a total disaster. The Federal Reserve is expected to begin cutting interest rates on September 18.

SPAC Bubble Inflation and Deflation

The Federal Reserve played a significant role in inflating and deflating the SPAC bubble. Presently, SPAC Research data reveal that about 100 blank-check companies are actively searching for deals, with 20 new ones launched in the last three months. This is a significant decrease from the SPAC bubble days when there were more than 600 pre-deal vehicles in the market.

Bottom Line

Despite the previous downturn, the SPAC market is showing signs of revival, with the largest flow of deals and proceeds since 2022 recorded in August. This resurgence could be attributed to the anticipated interest rate cuts by the Federal Reserve. However, it's worth noting that the SPAC market is still far from its bubble days. What's your take on this development? Do you think this revival will be sustained? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.