A history of SPAC booms and busts

The blank-check company is older than its reputation. What changed across four decades is not the idea but the protections wrapped around it, and almost every one of those was added after something went wrong.

The 1980s: why the rules exist

Blank-check offerings in the 1980s were largely penny-stock vehicles, and they were abused enough that Congress responded with the Penny Stock Reform Act of 1990 and the SEC with Rule 419. That rule is the ancestor of everything a modern SPAC holder relies on: proceeds held in escrow, a deadline, and money back if nothing closes.

The 1990s and 2000s: the modern shape

The structure was rebuilt in the early 2000s to sit just outside Rule 419 while keeping its spirit: a trust account, a shareholder vote, a redemption right. Volumes were modest and the vehicles were small. The 2008 crisis closed the window almost entirely.

2020 and 2021: the boom

Zero rates, a rush of private companies wanting a listing, and a structure that let them talk about projections produced the largest issuance the market has seen. Hundreds of vehicles priced, many with celebrity or marquee-investor sponsorship, and the pipeline of targets could not keep up with the capital raised.

2022 and 2023: the reckoning

Three things happened at once. Rates rose, which made holding a pre-deal SPAC to redemption a respectable return on its own and removed the reason to accept a mediocre deal. Redemption rates went above 90%. And regulators moved to narrow the disclosure gap that had made projections attractive in the first place.

The result was a wave of liquidations. Across the resolved universe, more vehicles have returned their trust than have completed a combination.

What survived

• Smaller vehicles. The $1bn shell is largely gone; most new trusts are a fraction of that.
• Overfunded trusts, because a redemption floor above $10.00 is now table stakes.
• Committed PIPEs and backstops, because trust cash alone can no longer be relied on.
• Shorter deadlines and more explicit extension mechanics, both priced in at the offering.
• Sponsor promotes that are more often tied to performance rather than simply to closing.

Each of those is a response to a specific failure. That is how the structure has always evolved, and it is a reasonable guess that the next set of changes will follow the next set of failures rather than precede them.