The following year, it became evident that the craze had diminished. In 2022, there were only 86 spac IPOs, raising a modest US$13.42 billion. This decline occurred alongside rising interest rates and increased regulatory scrutiny, driven by concerns over poor post-merger performance, lack of transparency and conflicts of interest between sponsors and public investors. Many spac mergers underperformed, resulting in substantial losses for shareholders.
At the height of the pandemic, the US market for special purpose acquisition companies, or spacs, reached its peak. In 2021 alone, the US witnessed 610 spac IPOs, raising US$160.75 billion ($210.42 billion). This surge was driven by various factors, including favourable market conditions, enthusiasm for high-growth companies, high-profile sponsors, celebrity endorsements and relaxed regulatory requirements.
For investors, there is substantial profit potential. One notable spac listing was Diamond Eagle Acquisition Corp, which merged with fantasy sports and sports betting operator DraftKings in April 2020. This merger resulted in a significant increase in its valuation, soaring from US$3 billion to over US$13 billion.
