The Special Purpose Acquisition Company (SPAC) Made a Comeback in 2025

Recently, you may have seen a flurry of headlines about SPACs. Short for “Special Purpose Acquisition Company,” SPACs offer an alternative means for companies to access capital from the public outside of the traditional initial public offering (IPO) process.

While exceptionally popular in 2021 before falling out of favor, SPACs regained some popularity in 2025. In fact, they have actually been around for a while, but have gained interest recently for a few reasons, which we will be discussing in this blog. Keep reading to learn more about what SPACs do, how they are structured, and more.

What Is a SPAC?

A SPAC, or Special Purpose Acquisition Company, is a shell company formed to raise funds in an initial public offering (IPO) with the intent to acquire or merge with an unspecified private business at a later date.

SPACs are formed by sponsors who usually have expertise in a specific field. While the investment teams may or may not already have at least one target in mind when the SPAC is founded, it is often referred to as a “blank check company” because investors don’t know what company the SPAC will ultimately target. Once the acquisition or merger happens, SPAC shares convert to shares in the new business.

The SPAC Process

SPACs must follow the usual IPO process to raise the funds that will be used for later acquisition. This includes filing a registration statement with the U.S. Securities and Exchange Commission (SEC), clearing SEC comments, and embarking on a roadshow to obtain underwriting commitments. Once an investment bank has been chosen to facilitate the IPO, securities are sold, and the proceeds are held in a trust until a private company is selected as a target for acquisition. The SPAC now has a set period of time (often 18 to 24 months but can vary) to find an acquisition target and complete the transaction. If the period lapses and acquisition isn’t completed, the SPAC is dissolved, and the funds are returned to investors.

Once a target has been selected, negotiations have been completed, and following the signing of the acquisition agreement, shareholders in both the SPAC and the target company must vote on the proposed transaction. Assuming that the merger is approved by shareholders (if that is a requirement) and the terms of the acquisition agreement are met, the SPAC and target will combine into a publicly-traded company. SPAC investors can then elect to sell out of their position or remain invested—now in the target company.

Advantages of SPACs

The traditional IPO process can be long, very expensive, and tend to favor the investment bank underwriting it. SPACs offer an alternative to this process with some additional potential advantages.

Speed

A huge check in the favor of SPACs is that, for a company seeking to go public, the process is quite abbreviated. Once a SPAC has chosen a target, it only takes about three to five months to complete that process from approval to closing, as most of the hard work has already been done. On the other hand, the traditional IPO process can take over a year.

Less uncertainty

During the traditional IPO process, companies only find out after the roadshow how much they’ll be raising and at what price. Through the SPAC process, there is less reliance on market demand. Companies negotiate a price with the SPAC once and it’s done. Pricing is transparent and upfront.

In addition to having more certainty regarding pricing, there is no need to fret about the timing of the IPO, which can have a significant impact on its success, as the money has already been raised.

Association with the sponsor

Depending on who is managing the SPAC, their association with the target company can offer the company some additional street cred, so to speak. While this effect won’t last forever, it can be a helpful boost in the short term.

A different dynamic

One thing to note is going public via a SPAC is not necessarily cheaper than going public through a traditional IPO. Typically, the SPAC will seek a substantial discount. However, with that in mind, the dynamic between a company and a bank underwriting its IPO is much different than that of a company and a SPAC. While a bank is generally more invested in the ecosystem as a whole, a SPAC is merging with the business it is taking public; therefore, it is more focused on the success of that specific company.

SPACs Are Not Without Rrisk

If shares in a SPAC are purchased at a premium, due perhaps to the perceived quality of a potential deal or because investor interest in SPACS is increasing, investors paying that premium can face substantial loss if a deal cannot be identified or closed. Year to year, there is often tens of billions in capital raised via SPACs still waiting to be deployed.

The SPAC Landscape and History

SPACs have been around for years but gained significant interest between 2020 and 2021. According to SPAC Research, SPACs raised $13.6 billion in offerings in 2019 before jumping to more than $80 billion in 2020. SPACs then ballooned to more than $160 billion raised in 2021 before falling significantly in popularity.

Some of the biggest names to become publicly traded after SPAC transactions were DraftKings, Virgin Galactic, and Nikola Corporation. While today SPACs are nowhere near 2021 levels, 2025 was their biggest year since that boom, leading many startup companies to consider this alternative route to an IPO.

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Want to learn more about investing in startups? Check out the following MicroVentures blogs to learn more:

• Understanding the Value of a Startup’s Intellectual Property
• An Investor Guide to Startup KPIs
• What is an Exit?
• 5 Tips for Diversifying Your Investment Portfolio

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.