The SPAC Market Is Back — But It Looks Different

After a dramatic collapse from the 2021 peak, the SPAC market has staged a genuine recovery. In 2025, 138 SPACs raised $25.8 billion — nearly triple the $8.7 billion raised in 2024, and roughly 40% of all U.S. IPO deal count for the year. The momentum has continued into 2026, with 50 SPACs raising a combined $10 billion in just the first two months alone.

But this is not a replay of the 2020–2021 frenzy. The deals getting done today are structurally cleaner, the sponsors more credible, and the investor base more selective. Understanding what has changed — and what hasn't — is essential for anyone looking at SPAC activity from either side of the table.

Where the SPAC Market Stands Today

At its 2021 peak, 613 SPACs raised $162 billion. That era was defined by celebrity-backed vehicles, pre-revenue targets, and inflated projections. The crash that followed was swift: by 2022 and 2023, the market had largely seized up, with most SPACs trading near their $10 net asset value and struggling to close transactions.

The 2025 recovery is driven by a different kind of sponsor — institutional, experienced, and with a track record. Serial sponsors who navigated the post-2021 environment have returned with renewed credibility, and private companies that have been sitting in PE portfolios well past their expected exit windows are increasingly receptive to the SPAC path. The result is a market with better supply-demand balance: fewer SPACs chasing a larger pool of realistic targets.

SPACs now position themselves less as an alternative to the IPO and more as a complement to it — particularly for companies with complex cross-border considerations, sector-specific capital needs, or timelines that don't fit the traditional roadshow model.

What a Standard SPAC IPO Looks Like Today

Unit Structure and Warrant Trends

The baseline unit price remains $10 per share. What has changed is what comes with it. In 2020–2021, the standard unit included 1 share and 1/2 warrant. Today, that fraction has compressed further — 1/3 warrants are common, and a growing number of deals are issued with no public warrants at all (so-called "warrant-lite" or "no-warrant" structures).

This shift is deliberate. Warrants dilute post-merger shareholders and create overhang that depresses the combined company's stock. Reducing or eliminating them makes the cap table cleaner and the post-de-SPAC story easier to tell to institutional investors.

Where warrants are still included, the exercise price is typically set at $11.50 per share — above the $10 unit price, meaning they only pay off if the combined company trades meaningfully higher after the merger.

Timeline and Trust

SPACs are still generally structured with an 18–24 month window to identify and close a business combination. During that period, 100% of IPO proceeds are held in a trust account, invested in U.S. government securities or money market funds. Investors who choose to redeem before or at the merger vote receive their pro-rata share of trust proceeds, including accrued interest. This built-in downside protection is one of the structural features that distinguishes SPAC investing from a traditional IPO.

The Economics: Why $100M in Trust Is Not $100M in the Deal

This is the most important concept for anyone evaluating a SPAC transaction. Multiple layers of cost and dilution sit between the IPO proceeds and the actual capital a target company receives.

Underwriting Fees

Total underwriting fees typically run 5–5.5% of IPO proceeds. The structure matters: roughly 2% is paid at the IPO closing, and the remaining 3–3.5% is deferred, payable only upon completion of the business combination. That deferred fee sits in the trust and reduces the cash available at de-SPAC.

Sponsor Promote

The sponsor typically receives founder shares equal to approximately 20% of the SPAC's post-IPO equity — often acquired for a nominal sum ($25,000 is common). This is the standard promote structure and remains the baseline in most current deals. What is emerging — though not yet the norm — is performance-based modifications: promotes that vest only if the combined company's stock hits certain price targets, or reduced promotes negotiated with anchor investors to make the deal more attractive.

Warrants

Both public warrants (issued to IPO investors) and private placement warrants (purchased by the sponsor to fund operating costs) represent additional dilution at the de-SPAC stage. The trend toward no-warrant structures is partly a response to this, as well as to accounting rule changes that required many SPACs to reclassify warrants as liabilities rather than equity — a headache that spooked issuers and investors alike.

Redemptions

This is where the economics get most complicated. Redemption rates have remained persistently high — often exceeding 95% in aggregate — meaning most investors who bought into the SPAC IPO choose to take their money back rather than stay in for the merger. A $100M SPAC with 95% redemptions leaves only about $5M in the trust for the combined company. The market has adapted to this reality through PIPE financing: private institutional investors commit capital alongside the de-SPAC to replace what was redeemed. PIPE markets have reopened meaningfully in 2025, making this workaround increasingly viable.

SPAC Terms: Then vs. Now

Sources: FTI Consulting SPAC Comeback Report (March 2026); Renaissance Capital U.S. IPO Market 2025 Annual Review; Gallagher SPAC Market 2025 Review; SPACInsider Full-Year 2024 Review.

Recent Deal Snapshots

The following examples illustrate how current SPAC structures play out in practice.

Cohen Circle Acquisition I (2025)

Sponsor: Betsy Cohen (repeat SPAC operator). This de-SPAC — which merged with Kyivstar Group to list the first Ukrainian company on a major U.S. exchange — posted a redemption rate below 40%, well below the 90%+ average. The unusually low redemption reflects strong institutional support and a credible sponsor track record, demonstrating what is possible when the deal quality is there.

Crypto-Treasury SPACs (2025 Theme)

One of the defining SPAC themes of 2025 was the wave of crypto-treasury company mergers — structures where the combined company holds digital assets as a balance sheet strategy. These deals attracted speculative investor interest and traded above trust value, a relatively rare occurrence in the post-2021 environment. The theme underscores how SPACs continue to capture momentum around emerging sectors faster than traditional IPO pipelines can.

AI and Automation Deals (2025–2026)

AI infrastructure and automation-focused targets have become the dominant sector in 2026 SPAC deal flow, consistent with broader public market trends. Sponsors with identifiable expertise in these areas have raised capital more easily and commanded better deal terms, reinforcing the bifurcation between established and first-time sponsors.

What to Watch in 2026 and Beyond

Several structural forces will shape SPAC activity over the next 12–18 months.

• Volume trajectory: The market could exceed 200 SPAC IPOs in 2026, per projections from advisors active in the space. Whether that materializes without reintroducing the excess of 2021 depends heavily on deal quality and de-SPAC execution.

• Continued warrant reduction: The shift toward warrant-lite structures is unlikely to reverse. As more institutional capital demands cleaner deal terms, sponsors who offer no-warrant vehicles will have an easier time raising.

• Regulatory environment: The SEC's 2024 final rules — effective July 2024 — significantly expanded disclosure requirements for SPAC IPOs and de-SPAC transactions, including enhanced dilution disclosure and removal of the PSLRA safe harbor for projections. These rules have raised the bar on documentation and legal preparation, adding cost but also credibility.

• D&O insurance: Premiums for SPAC-related D&O coverage are at historical lows, driven by improved litigation outcomes and carrier competition. That pricing is expected to hold in the first half of 2026 before potentially hardening as newly IPO'd companies compete for coverage.

• PIPE market health: Continued PIPE availability is not guaranteed. If market volatility returns or de-SPAC performance disappoints, institutional appetite for PIPE commitments could contract quickly — which would be the most immediate threat to deal completion rates.

Frequently Asked Questions

What are typical SPAC IPO terms today?

Units are priced at $10 per share. Most deals include either a 1/3 warrant or no public warrant. The sponsor receives founder shares equal to roughly 20% of post-IPO equity. Total underwriting fees run approximately 5–5.5%, with the majority deferred until the merger closes.

How does the SPAC trust account work?

Essentially all IPO proceeds — 100% — go into a trust account held in U.S. government securities. Those funds are locked until the merger closes or the SPAC liquidates. Investors who redeem before or at the vote receive their pro-rata share plus interest. This structure gives SPAC investors a level of downside protection that traditional IPO investors do not have.

Why are warrants being reduced or eliminated?

Warrants dilute post-merger shareholders and create ongoing stock price overhang. Additionally, accounting rule changes starting in 2021 forced many SPACs to reclassify warrants as liabilities, adding financial statement complexity. Reducing or eliminating warrants simplifies the structure and makes the deal more attractive to long-term institutional investors.

How much dilution is there in a typical SPAC?

Dilution comes from multiple sources: the sponsor promote (~20%), warrants (public and private), underwriting fees (~5–5.5%), and any PIPE discounts. The SEC has noted that combined dilutive impact can be substantial — the key variable is redemptions. High redemptions concentrate the remaining costs across a smaller equity base, making dilution worse for non-redeeming shareholders. This is why PIPE financing has become structurally necessary for most deals.

First Cover provides D&O insurance, EDGAR printing, and shareholder meeting services for public companies, and sponsors SPAC vehicles. For inquiries, visit firstcover.com.

Sources & Citations

1. FTI Consulting. "The SPAC Comeback: What's Different This Time?" March 2026. https://www.fticonsulting.com/insights/articles/spac-comeback-whats-different-time

2. Gallagher (Arthur J. Gallagher & Co.). "Inside the SPAC Market: 2025 Review and 2026 Forecast with Doug Ellenoff." March 5, 2026. https://www.ajg.com/news-and-insights/inside-the-spac-market-2025-review-and-2026-forecast/

3. Renaissance Capital. "Two de-SPACs Defy Trends to Raise $100 Million with Low Redemptions." August 20, 2025. https://www.renaissancecapital.com/IPO-Center/News/112903

4. Renaissance Capital. "U.S. IPO Market 2025 Annual Review." January 2, 2026.

5. EY Global IPO Trends. "2025 Global IPO Market Key Highlights and 2026 Outlook." December 2025. https://www.ey.com/en_pt/insights/ipo/trends

6. SPACInsider. "Full-Year 2024 SPAC Review." January 2025. https://www.spacinsider.com/news/spacinsider/full-year-2024-spac-review

7. ARC Group. "The Resurgence of SPACs in 2025." November 4, 2025. https://arc-group.com/resurgence-spacs-2025/

8. Odyssey Trust Company. "SPAC Outlook 2026: Trends and Expectations in a Resurgent Market." January 15, 2026. https://odysseytrust.com/insights/spac-outlook-2026/

9. U.S. Securities and Exchange Commission. "Special Purpose Acquisition Companies, Shell Companies, and Projections" (Final Rules, effective July 1, 2024). Securities Act Release No. 33-11265. https://www.sec.gov

10. Carter Ledyard & Milburn LLP. "SEC Adopts Major Changes to SPAC Rules." 2024. https://www.clm.com/sec-adopts-major-changes-to-spac-rules/

11. PwC. "How Special Purpose Acquisition Companies (SPACs) Work." https://www.pwc.com/us/en/services/consulting/deals/library/spac-merger.html

12. Empower. "SPACs Have Seen Increased Activity in 2025. Here's How They Work." December 10, 2025. https://www.empower.com/the-currency/money/spacs-how-they-work-news

13. American Bar Association / Business Lawyer. "Regulatory Developments 2024." Summer 2025. https://www.americanbar.org/groups/business_law/resources/business-lawyer/2025-summer/regulatory-developments-2024/