SPAC Veterans Drive $1.7B Surge in Six Weeks

The US blank-check market is witnessing a resurgence, with seasoned sponsors such as Michael Andretti, Howard Lutnick, and James Graf returning to attract $1.7 billion in investment. An additional $3.3 billion could potentially be raised in the forthcoming months by sponsors that have filed for new offerings since early June. 
 
Among those making headlines are former blank checks, including an advanced nuclear systems developer backed by Sam Altman, the movie studio behind the Saw franchise, and Donald Trump's media company. This has led to increased confidence in the durability of special purpose acquisition companies (SPACs), despite their recent setbacks. 
 
"Even if previous de-SPACs didn't perform well, there are benefits from having gone through the process and understanding what's involved in operating a SPAC," said Eric Pestrue from RiverNorth Capital Management. 
 
Most of these new blank-check issuances come from veterans who have previously completed SPAC deals. Over 30 SPACs priced or filed for new offerings since May featured dealmakers who had experience with past blank-check mergers. 
 
Investor demand for new SPACs remains strong: "Over the past year, investors—not lack of opportunities—were holding up progress," remarked Pestrue. 
 
The formation of new IPOs and blank-check vehicles picked up amidst lukewarm non-SPAC US IPO activity. A regular flow of 10 to 15 newly formed SPACS per quarter would balance traditional first-time share sales without inviting comparisons to prior mania periods between 2020 and 2021. 
 
However, performance after completing deals varies widely among recent blank check vehicles; some shares slumped following the public debut while others held steady or even performed impressively post-deal completion. 
 
Despite high-profile debuts boosting industry attention towards IPO markets' below-average activity being bullish on blank-check vehicles, about half of the of the nearly 50 companies completing a U.S. SPAC merger this year lost more than 80% of their value. 
 
A major problem persists in high rates of redemptions when investors exchange their shares for money held by the SPAC, thereby reducing the amount available for merger deals. This year's average redemption rate exceeded 90%, according to SPAC Research data analyzed by Bloomberg. 
 
Despite these challenges, the resumption of US SPAC offerings has helped boost IPO activity for banks that fueled pandemic-era hyperactivity. For instance, Cantor Fitzgerald facilitated six deals bringing in $1.5 billion this year, which propelled it to the top spot on Bloomberg's league tables for US IPO underwriting. 
 
With approximately 100 SPACs currently seeking targets, industry experts suggest that now is a better time to strike deals compared to previous bubble periods. 
 
Joe Voboril from 1789 Capital and finance chief at Colombier Acquisition Corp. II commented: "There was a period in 2021 and 2022 where there were more SPACs than private businesses ready to go public, leading to fewer deal completions; but now the pendulum has almost fully swung back."