While the IPO window all but closed over the past month, SPAC activity has held a brisk pace.
So far this month, thirteen new blank check companies have filed to go public, slightly above March (12), and nearly quadruple last April (3). Similarly, seven SPACs have priced offerings this month, compared to four last month, and none last April.
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The recent uptick comes amid a shaky IPO environment. Surging volatility, trade tensions, and inflation concerns rocked markets in April, and several traditional IPO candidates delayed listing plans. But after years of waiting, many private companies are itching to go public in order to meet capital and liquidity needs. A narrow IPO window will likely box out some of these potential issuers, and SPAC sponsors are looking to capitalize.
But are SPACs back? Following the SPAC market’s collapse in 2022, transactions were plagued by poor post-merger returns and high redemptions, which resulted in a wave of withdrawals and liquidations, as well as a steep drop in new blank check formation. New SPACs that did come to market had to sweeten the terms for investors, offering rights and overfunded trusts.
Since then, the SPAC market has shown signs of a rebound, and over the past year, new blank check IPOs have returned to pre-COVID levels. Sponsors have pulled back on generous unit terms. Average deal size has increased, albeit nowhere near the levels seen during the 2020/2021 SPAC boom.
Even with the recent revival, it’s still too soon to tell if this is a true, sustainable recovery. Disappointing de-SPAC returns, and by extension high redemption rates, remain a millstone for the industry. Investors and companies alike will need to see a substantial improvement in post-merger returns before SPACs are reestablished as a desirable IPO alternative.
In one positive signal, the largest de-SPAC in over a year, retail trading platform Webull (BULL), was very well received when it began trading in mid-April. After initially skyrocketing 375% when the merger closed, Webull has since dropped significantly, though it still closed Friday an impressive 73% above its transaction price.
