SPACs Riding $4 Billion Wave as IPO Market Struggles

With the IPO market struggling, special purpose acquisition companies (SPACs) are enjoying a comeback.

That’s according to a report Thursday (April 17) by Bloomberg News, which notes that the so-called “black check” industry has seen a busy year thus far, with investors putting together $1 million just this month in spite of President Donald Trump’s market-rocking trade war.

Since Trump rolled out the tariffs on April 2, close to a dozen SPAC sponsors filed for listings, aiming to raise $1.8 billion to take private companies public, the report added. SPACs have raised more than $4.1 billion so far this year.

“SPACs tend to gain momentum during periods when the traditional IPO market faces headwinds,” said Mark Schwartz, who heads initial public offering (IPO) advisory for EY. “Prospective SPAC sponsors are optimistic about continued deal flow in the coming months and quarters, which is fueling the launch of new SPACs in the market.”

Among the recent companies considering going public via SPAC is Kodiak Robotics, an autonomous freight truck startup which is planning to merge with blank check company Ares Acquisition Corporation II. That deal will reportedly value Kodiak at $2.5 billion pre-money.

The Bloomberg report notes that SPACs were once considered “the backwater of the public markets,” but rose in popularity during the pandemic. However, that wave soon ebbed when regulators stepped up scrutiny of SPACs, with high-profile collapses souring the market.

Now, SPACs are enjoying a resurgence, partially because many companies that wanted to go public this year are facing a stagnant IPO market.

“IPOs are not the destination, but they are a massive capital formation moment,” QED Investors Partner Amias Gerety said in an interview with PYMNTS earlier this month.

“It empowers companies that go public, allowing them to be more aggressive, to acquire companies, hire more, and lower their cost of capital. All these benefits are going away.”

He stressed there is a clear divergence in advice offered to FinTechs based on their stage of growth. Early-stage companies, Gerety told PYMNTS CEO Karen Webster, should stay narrowly focused on customer acquisition and product development, mostly insulated from macroeconomic uncertainty.

“The early stage, the classic advice is you’re so small, the only way you win is by winning,” Gerety said. “Get the next customer, make the next great product, delight the next consumer. That’s the only thing you can do. It’s the only thing you should do.”