Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / How SPACs Are Making a Quiet Comeback in 2026
Transcript
- Lucas: So the Nasdaq is up over two and a half percent in the last five days, the S and P five hundred is touching seventy-five hundred, and the bull market just keeps churning. But underneath that, there's something I've been watching that feels like a ghost from the past. Luna: Let me guess — SPACs? Lucas: Exactly. Special purpose acquisition companies. Blank-check companies. The vehicle that, back in 2020 and 2021, raised hundreds of billions of dollars, took a bunch of companies public, and then — for most retail investors — ended pretty badly. But I'm seeing signs of a quiet comeback. Luna: Define 'quiet comeback.' Are we talking IPO volume or actual merger activity? Lucas: Both, actually. Through mid-June 2026, we've had about forty SPAC IPOs this year. That's still a fraction of the peak — back in early 2021 we had over three hundred in a single quarter — but it's up from basically zero in 2024. And the average deal size is smaller, around two hundred fifty million dollars, compared to four hundred million at the peak. That's a structural shift. Luna: And that smaller size — is that because the targets are earlier stage, or because sponsors are being more cautious? Lucas: It's both, but the bigger factor is regulatory. The SEC's 2023 rules basically killed the old model, where you could have a three-page 'projections' deck and a celebrity sponsor. Now sponsors have to disclose more about target valuation, they have to show that the target has a path to profitability — not just revenue growth — and they can't use the same kind of aggressive warrant structures that diluted retail investors so badly. So the new SPACs are leaner, with more institutional backing. Luna: But if they're institutional, who's the retail angle? I remember the last cycle, every YouTuber had a SPAC pick. Lucas: That's the thing — this time, a lot of the retail money is coming through ETFs that hold SPACs pre-merger. There's actually an ETF that launched in March that specifically invests in SPAC trust units. It's small, about a hundred and fifty million in assets, but it gives retail investors exposure without having to pick individual SPACs. And the data so far suggests the new SPACs are performing better post-merger than the 2020–2021 cohort. Luna: Better how? A higher percentage are trading above trust value after the merger? Lucas: Yes. According to a recent analysis, about sixty percent of SPACs that completed mergers in 2025 are trading above their ten-dollar trust value as of June 2026. Compare that to the 2021 vintage, where something like eighty percent were trading below trust value a year after merger. So there's a real improvement. But the sample size is still small — we're talking maybe thirty deals last year. Luna: And the sponsors — are we seeing any of the old names coming back, or is it a whole new group? Lucas: A mix. Some of the more reputable sponsors from the first wave are back, like the ones with actual operating experience. But the big celebrity names — the athletes, the musicians — those are mostly gone. The SEC rules made it harder to just slap a famous name on a blank check and raise a billion dollars. So the new sponsors tend to be former private equity partners, industry executives, people who actually know how to run a merger process. Luna: Interesting. So the bull market is creating a favorable environment for these deals, because valuations are high and there's a lot of cash looking for yield. But I wonder — if the market turns, do SPACs get hit first? Lucas: Historically, yes. SPACs are extremely sensitive to market sentiment because they have that optionality component. But here's where the structure matters now: a lot of the new SPACs have higher redemption thresholds. In the old days, sponsors needed like ninety percent of shares to not be redeemed to close a deal. Now some have thresholds as low as sixty percent. That gives them more flexibility to get deals done even if retail investors pull out. And the warrants are structured so that they don't dilute as aggressively. Luna: So you're saying the new SPAC is more like a traditional private equity vehicle than a speculative lottery ticket? Lucas: That's exactly the framing I'd use. Look, the business model is still the same — sponsors put up a small amount of capital, they find a target, they merge, and they get promoted for their efforts. But the economics have shifted. The average promote, which used to be around twenty percent of the post-merger equity, is now closer to fifteen, and sponsors are putting more of their own capital at risk. That aligns incentives better. Lucas: I also think the market backdrop matters. Real GDP growth is running around one point six percent annualized, rates are stable at three point six three percent, and the bull market has been broadening beyond mega-cap tech. That makes it easier to find reasonably priced private companies that want to go public but don't want to go through a traditional IPO roadshow. Luna: And you mentioned the Russell 2000 is up one point two percent in five days. Small caps are attracting attention. If SPAC targets tend to be smaller companies, they could benefit from that rotation. Lucas: Exactly. The mid-cap and small-cap space is where a lot of these targets live. And with the IPO market still somewhat constrained — traditional IPOs are up this year, but not dramatically — SPACs offer an alternative path. The question is whether retail investors have learned the lesson from last time. Luna: That's the million-dollar question. I remember the stories of people putting their stimulus checks into SPAC warrants and losing most of it. Do you think the new structure is enough to prevent that from happening again? Lucas: Partly. The warrant structures are less toxic, the redemption mechanics are better, and the disclosure is more thorough. But the underlying risk is the same: you're investing in a blind pool that's betting on management's ability to find a good target. No amount of regulation can eliminate that uncertainty. The difference this time is that the typical retail investor who buys a SPAC through an ETF gets diversification, and the individual SPAC investor has more time to evaluate the target before the merger vote. Luna: You know, speaking of the value of well-informed decisions — if our conversations have helped you think about a market trend or a financial product more clearly, that's exactly what we're aiming for. A couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: Yeah, it really does make a difference. No ads, just listener support. So we appreciate every bit of help, and it keeps us focused on digging into topics like this one. Luna: Alright, back to SPACs. One more question: what's the one key metric you'd recommend our listeners watch if they want to track the health of this comeback? Lucas: I'd look at the average redemption rate for SPACs completing mergers in the current quarter. If that rate stays below forty percent, it suggests investors are confident in the deals. If it starts creeping above fifty percent, that's a warning sign. Also watch the number of SPAC liquidations — if sponsors start returning cash instead of finding targets, the comeback could stall. Luna: So it's still early, but the structural changes are real. I think this is one of those quiet trends that could become more important if the bull market broadens further. Lucas: Exactly. It's not the wild west of 2021. It's more like a regulated frontier. And in a bull market, investors are willing to take more chances, but the guardrails are stronger. Whether that combination actually produces better long-term returns for retail investors — we'll have to watch the data. Luna: And if we see another round of SPAC implosions, that analysis will be a whole episode by itself. Lucas: Count on it. For now, let's call this a tentative rehabilitation. The bull market is giving SPACs a second chance — but second chances in finance usually come with strings attached.