Why most SPACs never close a deal

It is tempting to read a liquidation as a failure. Usually it is the structure doing exactly what it promised: no target was found on acceptable terms, so the money went back. The interesting question is why that outcome is the more common one.

Too many vehicles, not enough targets

The 2020 and 2021 cohorts raised more capital than the pipeline of private companies willing to go public through a merger could absorb. Vehicles launched in that window were competing with hundreds of others for the same targets, on a clock, with sponsors who all faced the same asymmetric incentive.

Redemptions changed what a deal was worth

Once redemption rates rose above 90%, the cash a target could count on collapsed. A vehicle that raised $300m might deliver $20m at closing. Targets that had negotiated on the assumption of a full trust walked away, and minimum cash conditions started failing.

Rates made waiting profitable

When short rates rose, holding a pre-deal SPAC to redemption became a respectable return on its own. That removed much of the reason for a holder to accept a mediocre deal, and it made redeeming the rational default rather than the exception.