More SPACs are throwing in the towel. They may still offer a Payday.

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Bill Ackman.

Christopher Goodney / Bloomberg

Two years ago, special-purpose acquisition companies roared through the IPO market as stock issuances heated up after the pandemic turned stone-cold. Now, transaction volumes are down by almost 90% and many SPACs launched in 2020 may have to give investors their money back.

SPACs, or blank-check companies, raise money in an initial public offering with the goal of finding a private company that can close if it has more capital, and merge with it. The money collected in an IPO accrues interest in a trust until the merger closes and the cash becomes available for growth.

The issue — an opportunity in many cases — is that SPAC usually has two years to find a partner and close the merger, or risk repaying investors. Those deadlines are coming to an end for the so-called SPAC Class of 2020, 248 blank-check companies that listed shares that year benefited from a wave of enthusiasm as investors sought to invest in growth companies.

Over a thousand companies went public in 2021, including a record 613 SPACs. But bigger issues, including the stock market crash, the war in Ukraine, inflation and fears of recession, have plagued the IPO this year. Just 70 blank-check companies have been launched so far in 2022, while traditional offerings have slowed.

The returns for the SPAC class of 2020 are not very good. More than 150 blank-check companies that year found mergers and closed, by an analysis. baron’s According to Renaissance Capital, which provides research on IPOs, indicates but only 7% of these are trading above their $10 offering prices. The Renaissance Capital IPO ETF, which invests in companies that have gone public in the last three years, is down 44% so far this year.

Eighty-four or 34% of the 248 SPACs from 2020 have not merged yet. The figures include 56 SPACs that have not announced deals and 28 whose mergers are pending, according to baron’s analysis. Some of Wall Street’s biggest names—including Bill Ackman’s $4 billion Pershing Square Tontin Holdings (ticker: PSTH) and two SPACs backed by venture capitalist Chamath Palihapitiya—have yet to complete the transaction.

Pershing Square Tontin faces a July 24 deadline to close the transaction, although it could be extended to January 24, 2023. Palihapitiya’s two SPACs, the $1.15 billion Social Capital Hedosophia VI (IPOF) and the $460 million Social Capital HedoSophia IV (IPOD), have until October 14 to complete the deals. Pershing Square and Social Capital each declined to comment.

In the class of 2020, liquidations have jumped among SPACs. Seven blank-check companies in that group have been liquidated, or are planning to do so, according to baron’s Information According to industry tracker SPAC Research, this compares to two liquidations for blank-check companies launched in 2019, two from 2018 and three from 2017. None of the SPACs launched in 2021 have sought liquidation.

Michelle Nussbaum, a partner at the law firm Loeb & Loeb, who has advised on SPAC for more than 20 years, is expected to be more liquid due to the volume of blank-check companies that have recently gone public. He pointed to 248 SPACs that listed their shares in 2020, a 76% increase from 59 that went public a year earlier.

The liquidation would “increase the same amount,” Nussbaum predicted,

Evan Ratner, president of Levine Capital Strategies, a New York money-management firm that invests in SPAC, also expects more blank-check companies to become liquid. “Most sponsors have to calculate losing risk capital versus making a bad deal,” he said.

Renaissance Capital senior IPO strategist Matt Kennedy said most SPAC liquidations from the class of 2020 are expected to be hit in the fourth quarter. “However, we could see multiple liquidations in Q3, especially if the pending merger is closed,” Kennedy said.

However, Loeb’s Nussbaum does not expect that more than 20% of SPACs will eventually expire, as blanc-check companies can usually extend their merger deadlines until they find a suitable target. For example, GreenCity Acquisition Corp. It has extended its deadline to close a deal at least 10 times and now has until October 28 to complete the merger, according to a filing with the Securities and Exchange Commission. GreenCity did not respond to messages seeking comment.

A SPAC liquidation isn’t necessarily a bad deal for shareholders, Nussbaum said, because companies tend to pay shareholders at the offering price, usually around $10 per share or more, even if a shareholder has bought the stock at a lower price. Bought it, he said. “It’s okay if everyone doesn’t make a deal because the public gets a full return of their investment in that case,” Nussbaum said.

Most of 2020 SPACs are trading below their offer prices. The SPAC liquidation “could provide a decent return,” said Levine’s Ratner. “It was much more attractive before the rate hikes,” an increase in payouts available from fixed income investments.

More SPACs are projected to refuse to find merger partners as competition for deals is intense. According to data from SPAC Research, nearly 600 blank-check companies, with a combined $161.5 billion in trust, are hunting for merging businesses. “Not everyone will be able to strike a deal,” Loeb’s Nussbaum said.

Write to Louisa Beltran at

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