SPACs Are Not Resurging. Traditional IPOs Are Disappearing

Special Purpose Acquisition Company (SPAC) Initial Public Offerings (IPOs) are outpacing traditional IPOs, and some headlines suggest a return to the speculative boom of 2020–21. That comparison is misleading. Today’s SPAC market looks nothing like the frenzy of the pandemic era, when sponsors rushed hundreds of blank-check companies to market, and investors poured in capital indiscriminately. Instead, SPACs have largely returned to what they historically were before the bubble: a niche alternative listing route for companies that may struggle to meet the increasingly demanding standards of the traditional IPO market.

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A more stable regulatory framework has helped support that recovery. The U.S. Securities and Exchange Commission’s (SEC) 2024 SPAC rules remain in place, but some of the most aggressive proposals — including statutory underwriter liability for de-SPAC banks — were ultimately dropped. That gave sponsors enough clarity to operate again, though not enough to reignite speculative excess.

The data also looks less dramatic in absolute terms than the headlines imply. SPACs accounted for roughly 40% of U.S. IPOs in 2025 and about 70% in early 2026, which appears dominant at first glance. However, that share is inflated mainly because the traditional IPO market has collapsed, not because SPAC issuance has surged. What has really changed is the traditional IPO market itself. It has moved sharply upmarket, favoring billion-dollar-scale companies with GAAP profitability. Many prospective issuers no longer meet that threshold. That is the real denominator effect behind SPACs’ rising market share.

Quantum Leap to the Past

Take Xanadu Quantum (XNDU) as an example; in March, it went public through a $3.1 billion SPAC merger with Crane Harbor (CRAN). Xanadu reported about $4.6 million of revenue in 2025, remained deeply loss-making, and its stock plunged more than 50% after it filed to register roughly 294 million shares for resale. The going-concern point still requires direct confirmation in the auditor’s report or in the 20-F filing. No traditional Equity Capital Markets (ECM) desk would underwrite this profile, and the market priced it accordingly.

Kodiak AI (KDK) is an autonomous trucking company that went public via a SPAC merger, valuing it at about $2.5 billion, and it reported roughly $3.8 million of 2025 revenue. The target profile has reverted to the pre-2020 pattern: adventurous, pre-revenue, sector-specific bets that need a listing but cannot earn one conventionally.

Front Door vs. Back Door

In contrast, in 2021, I connected Pagaya Technologies (PGY) with EJF Acquisition Corp. in a transaction marketed as a large de-SPAC and supported by institutional investors. Unlike many SPAC-era stories, Pagaya had real revenue and a live product in the market, making the SPAC feel more like an accelerated IPO path than a last-resort listing choice. It was a front-door deal with a $350 million private investment in public equity (PIPE) backed by Tiger Global and GIC.

Pagaya was the kind of company that could have employed a conventional IPO; it just wanted to accelerate the process. It had real revenue, institutional-grade investors, and a product deployed across major lending platforms. It was using the SPAC as a faster IPO alternative, not as the only option. That seller’s market is gone. Pagaya itself trades at a $1.2 billion market cap today, an 86% decline from the announcement. However, the company has consistently grown since its listing and turned GAAP profitable in 2025. The business works; the multiples have compressed.

Let’s have a look at the investor base, which is much more confined today, as evident from the over 90% median redemption rate. SPAC IPO investors are mostly hedge funds or arbitrage desks that know how to play the redemption arbitrage games better than most. Cash-in-trust yields of 4%–5% make the IPO an easy sell to those investors.          

What the Track Record Shows

We also see a clear pattern on the issuers’ side. Serial sponsors dominate: about 80% of 2025 IPOs are from repeat sponsors. Similarly, three banks, Cohen & Co. (COHN), Cantor, and BTIG underwrote 56% of all 2025 SPAC IPOs. The business model works independently of de-SPAC outcomes. Because regular IPOs were slow, big banks like Goldman Sachs (GS) resumed SPAC deals. Infinite Eagle’s (IEAG) $300 million IPO was one early example of that comeback.

The one part of the SPAC market that still hasn’t recovered is post-merger performance. De-SPAC companies have lagged the broader market for years, and many post-pandemic deals have lost most of their value. Bankruptcy rates have also stayed high. Recent examples show the same pattern: Kodiak went public at a $2.5 billion valuation but now trades much lower, while Twenty One Capital (XXI) fell from a 52-week high of $59.75 to $8.91.

SPACs have returned to their natural state: a niche product for a specific type of company and a specific type of investor. The 2021 bubble was the anomaly; SPACs briefly became mainstream, with celebrities sponsoring blank-check vehicles and companies that could have listed conventionally choosing the shortcut instead.

History Rhymes

What remains is the original purpose, operating within a better-regulated framework. The traditional IPO market now serves only companies with the scale and profitability to justify a public listing. The economics still work for sponsors, banks, and hedge funds. I am ignoring the noise; this is not a comeback story. The evidence shows it is a niche that has found its place.