Not long ago, SPACs were written off. After exploding in popularity in 2020 and 2021, they ran headfirst into regulatory pressure, investor fatigue, and a string of failed deals. By the end of 2023, sentiment around Special Purpose Acquisition Companies had collapsed. IPO activity slowed, retail interest dried up, and Wall Street moved on to newer stories.

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But here we are in early 2025, and SPACs are back in the headlines. In just the first two months of the year, SPAC IPOs have already outpaced the entire first quarter of 2024. Major banks are reentering the market, and a few high-profile mergers have delivered strong early returns. For anyone who thought the vehicle was dead, the numbers suggest otherwise.

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Why SPACs Are Getting a Second Look

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Wall Street doesn’t invent many new trends. Instead, it recycles old ones with just enough of a twist to make them look fresh. That’s exactly what’s happening with SPACs now.

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Several forces are driving the resurgence. First, interest rates have begun to stabilize. That alone makes it easier for companies to seek capital, and while traditional IPOs remain sluggish, SPACs are again being seen as the faster route to public markets. There’s also been a cleanup effect. The Securities and Exchange Commission spent most of 2022 and 2023 tightening disclosure requirements and holding sponsors to higher standards. That regulatory pressure pushed out the lowest-quality deals, leaving a leaner field behind.

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We’ve seen this type of reset before. After the dot-com crash in the early 2000s, investor confidence in tech IPOs cratered. But a few years later, companies like Google proved that the model still worked—just not in the way people had chased it during the mania. SPACs are now going through their own version of that post-bubble maturity phase.

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Where the Real Opportunities Are

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This cycle looks different than the last. In 2021, anything vaguely futuristic was enough to fuel a rally. Companies with no revenue, minimal track records, and lofty narratives about electric vehicles or space tourism managed to attract billions. That era is over.

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Today, successful SPACs tend to have more grounded fundamentals. Real revenue, actual customers, and clear business models are being prioritized over raw potential. Energy and defense-related SPACs have caught attention due to geopolitical uncertainty and public sector spending. There’s also renewed interest in biotech and AI-focused companies, although those sectors remain inherently volatile.

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Some investors will still chase hype. But the better plays this time around are more likely to come from sponsors with experience, track records, and a disciplined approach to valuation.

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The Risks Are Still Here

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Despite the cleaner image, the basic challenges of SPAC investing haven’t changed much. The structure itself still leaves room for dilution, particularly once warrants and sponsor shares come into play. In the past, many deals looked good on paper but quickly lost steam once lock-up periods expired and early insiders exited.

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Legal risk is also growing. The Delaware Chancery Court has become more active in SPAC-related cases, signaling a willingness to hold sponsors and boards accountable when deals appear misleading or unfair to public investors. That kind of legal scrutiny may help protect retail investors in the long run, but it also adds another layer of complexity to already difficult analysis.

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If you’re buying into a SPAC today, you need to do more than just skim the press release. Understanding the terms of the deal, the quality of the target company, and the incentive structure of the sponsors is critical. That wasn’t always the norm in the last cycle, but it will likely separate winners from losers this time.

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