Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / Why the Bull Market Is Reshaping the SPAC Playbook in 2026
Transcript
- Lucas: The SPAC market has been pronounced dead so many times since 2021 that it's almost become a running joke on Wall Street. Luna: And yet, it's not dead. I was looking at the numbers this morning — there have been 14 SPAC IPOs in the second quarter of 2026, which is more than all of last year combined. Lucas: Exactly. And the structure is completely different from the 2020-2021 frenzy. If you've gotten something out of our conversations about how capital markets are evolving, a couple of dollars a month genuinely makes a difference in keeping this show ad-free. You can help at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to support independent analysis. So Lucas, what's actually different about these new SPACs? Lucas: The biggest shift is that the 2026 SPAC is essentially a private equity style vehicle, not a blank-check lottery ticket. The average sponsor now puts in significantly more co-investment — we're talking 15 to 20 percent of the trust, compared to basically zero in the prior cycle. Luna: Right, so they have real skin in the game. That changes the incentive structure massively. Lucas: It does. And the targets are different too. In 2021, you had SPACs chasing electric-vehicle startups with no revenue and grand projections. Now, the deals are concentrated in infrastructure, industrials, and business services — companies with actual earnings and a clear path to cash flow. Luna: Give me a specific example. Who's doing this well right now? Lucas: DigitalBridge — the digital infrastructure investment firm — just closed a SPAC merger with a data-center operator that had positive EBITDA before the deal. That would have been unthinkable in 2021. The data center was already profitable, and the SPAC provided growth capital, not a rescue. Luna: So it's more like a later-stage private equity exit than a speculative IPO. That actually makes sense in a bull market where traditional IPOs have been choppy. Lucas: That's the key insight. The traditional IPO market has been strong but volatile — the S&P 500 is at 7,458 but we've seen 1.4 percent swings in a week. Companies are looking for certainty of execution, and a SPAC gives you that if you structure it right. Luna: But what about the redemption problem? In the last cycle, retail investors would redeem their shares at the merger vote, leaving the SPAC with way less cash than expected. Lucas: The new SPACs have redemption caps built in — typically 50 to 60 percent maximum. And they're using 'earnout' structures where sponsor shares only vest if the stock trades above a certain price for a sustained period. That aligns everyone around long-term value. Luna: So the sponsors can't just cash out on day one. That was the biggest criticism of the 2021 model — founders made millions even if the stock tanked. Lucas: Exactly. And the institutional investor base has shifted. Instead of retail speculators, these new SPACs are being marketed to pension funds and endowments. The recent $31 billion IPO frenzy in India actually showed that institutional demand for new issuance is still enormous — but they want quality. Luna: That Indian IPO was mostly institutional, right? The retail portion was tiny by comparison. Lucas: Yes, and that's the model SPACs are copying. You target large asset managers who can commit $100 million or more and agree not to redeem. In exchange, they get a slightly better warrant structure or a lower promote. Luna: So the SPAC is becoming more like a traditional pipe deal — a private investment in public equity — just with a different wrapper. Lucas: Exactly. And that's why I think this iteration is more sustainable. The SEC's new rules from 2024 also helped — they clarified that SPACs can be held liable for projections, which scared away the bad actors. Luna: But there's still the issue of dilution. Even with better structures, SPACs typically have warrants and founder shares that dilute public holders over time. Lucas: That's the trade-off. The new SPACs have smaller warrant coverage — typically one-quarter warrant per share instead of a full warrant. And the founder shares are smaller, too. The dilution is maybe 15 percent instead of 30 percent. Luna: Still meaningful, but more manageable. And if the sponsor is putting in real capital, they're incentivized to make the stock perform. Lucas: Right. The Fed holding rates at 3.63 percent also helps — stable financing costs make it easier to underwrite these deals. Dallas Fed President Logan recently called for 'modestly' higher rates, but the market isn't pricing that in aggressively. Luna: So the macro environment is supportive, the structures are better, and the targets are more credible. Does that mean we're going back to 600 SPAC IPOs a year? Lucas: No, and I don't think anyone wants that. The realistic outlook is maybe 60 to 80 SPACs per year, each with an average trust size of $300 to $400 million. That's a healthy niche, not a frenzy. Luna: And that's probably fine. The market doesn't need another flood of questionable deals. It needs a reliable alternative to the traditional IPO process. Lucas: The thing that's interesting is that we're also seeing SPACs used for roll-up strategies — combining several small private companies into one public entity. That's hard to do with a standard IPO. Luna: Like a mini-conglomerate builder. Who's doing that? Lucas: There's a SPAC sponsored by a mid-market private equity firm that's merging three industrial-services companies — each doing about $50 million in revenue — into one entity that will have scale to go after larger contracts. The combined company will have positive EBITDA from day one. Luna: That's actually a smart use case. The SPAC provides the liquidity event and the public currency, but the underlying businesses are already proven. Lucas: Yeah. And the earnout structure means the private equity sponsors only get their full promote if the stock stays above $12 for 20 out of 30 trading days. That keeps them focused on execution. Luna: So what's the biggest risk for this new wave of SPACs? Is it just the same old execution risk, or is there something new? Lucas: I think the biggest risk is actually the 'pipe cliff' — the institutional investors who provide the private investment in public equity often have lock-up periods of six months. When those expire, if the stock has already run up, you could see heavy selling. Luna: Right, that happened in some of the 2021 deals too. The pipe investors came in at $10, the stock popped to $15, and then they sold the day the lock-up expired. Lucas: The new SPACs are trying to mitigate that by staggering lock-ups — some investors have nine-month lock-ups, others twelve. But it's not a perfect solution. Luna: Still, it shows the market is learning from past mistakes. That's more than you could say about the 2021 cycle. Lucas: Absolutely. And I think the ultimate test will be the performance of the first wave of these new SPACs once they're trading for a year. If they hold up better than the 2021 cohort, you'll see even more institutional adoption. Luna: It's a bit like the evolution of the ETF market — early products had structural flaws, and over time the industry figured out what worked. Lucas: That's exactly the right comparison. SPACs are a tool, not a scam. And right now, in July 2026, the tool is being used more responsibly.