SPACs boomed, busted, then got a new rulebook

The record

On 24 January 2024, the Securities and Exchange Commission adopted new rules for special-purpose acquisition companies, published as Release Nos. 33-11265, 34-99418, and IC-35096 and effective 1 July 2024. The rules make a target company a co-registrant on the registration statement used in its de-SPAC merger, exposing it to liability under Section 11 of the Securities Act; remove the safe harbor SPACs had used for forward-looking projections; and, per the SEC's press release, add mandatory disclosure of "compensation paid to sponsors, conflicts of interest, dilution" and the basis for any projections. SEC Chair Gary Gensler said "just because a company uses an alternative method to go public does not mean that its investors are any less deserving of time-tested investor protections."

What the sources establish

The adopting release's own Table 1, compiled from SPAC Analytics and Dealogic data on the Commission's telling, documents the cycle the rules respond to: SPAC IPOs rose from 248 in 2020 to 613 in 2021 — 63% of that year's total IPO count — before collapsing to 86 in 2022 and 31 in 2023. Proceeds moved even more sharply, from $162.5 billion raised by SPAC IPOs in 2021 to $3.8 billion in 2023. Completed de-SPAC mergers peaked later and declined more slowly: 199 in 2021, 101 in 2022, and 89 in 2023. The release calls these estimates, not audited counts, but the scale of the swing is not in dispute across the two sources it cites.

Scope and revision

The rules govern disclosure and liability from their July 2024 effective date forward; they do not restate the SPAC deals in the release's historical table, a snapshot through 2023 as SPAC Analytics and Dealogic recorded it. A SPAC IPO count is not a completed-exit count: many SPACs that went public in 2020 and 2021 never completed a merger before their deadlines and returned trust funds instead, a category the de-SPAC line does not capture alone. Proceeds attributed to SPACs in a given year measure capital raised by the shell at IPO, not the value ultimately delivered to a merged company's investors, which can differ once shareholder redemptions at the merger vote are counted.

The decision in front of you

Editorially: a founder approached about a de-SPAC merger, or an employee holding equity in a target, should read the new co-registrant and projection-disclosure requirements as raising the target company's own exposure and diligence burden relative to the pre-2024 regime, not only the sponsor's.

• Was the SPAC IPO or the de-SPAC merger the event being counted, and do they belong to the same year?
• Does a cited SPAC statistic predate or postdate the 1 July 2024 disclosure rules?
• How many shareholders redeemed at the de-SPAC vote, and what capital actually reached the merged company?

The rise from 248 to 613 SPAC IPOs in a single year, and the fall to 31 two years later, is one of the sharpest cycles in the data cited here — and the rules adopted near its trough now attach more of the disclosure burden, and more of the liability, to the company on the other side of the merger.