Over 66 SPACs were raised in 2020, according to PitchBook, up from 30 in 2019, amid a year of uncertainty that opened tech companies' eyes to an IPO alternative
For many in the tech industry, 2020 was a year of two acronyms. There was COVID, obviously. And then there were SPACs. Tweets: @hkanji Tweets: Hussein Kanji / @hkanji : Next year could therefore determine whether SPACs stick around as part of the going-public arsenal, or if they're relegated once more to an option only for the least-attractive companies https://www.protocol.com/...
Context & Ripple Effects
At the end of a pandemic year that shut down traditional IPO windows for stretches, PitchBook counted more than 66 blank-check vehicles raised in 2020 versus 30 in 2019 — and tech founders, per Hussein Kanji, were treating SPACs as a genuine alternative rather than a last resort. The mechanism behind the appeal had already been spelled out in August, when [[a:957145|competition among sponsors was improving terms for target companies and cutting their cost of capital]] even as underpricing worsened in conventional IPOs.
Kanji framed 2021 as the test of whether SPACs would stick as a going-public tool or revert to an option for the least-attractive companies. The corpus supplies the answer in two acts: issuance [[a:981995|peaked at over $36B in March 2021 before July 2022 became the first month in five years with no new SPACs]], and the class of 2021 aged badly.
First-order effects
- Target companies captured better deal terms and cheaper capital in 2020 as sponsor competition intensified, while traditional IPOs kept leaking value through underpricing.
- Tech boards gained a credible second route to public markets during COVID-era volatility, changing the negotiation dynamic with bankers.
Second-order effects
- Volume chased quality downward: nearly half of sub-$10M-revenue startups — mostly tech — that went public via SPACs in 2021 missed their earnings or revenue targets, pressuring the whole vehicle's reputation.
- The post-boom hangover hit issuers directly, with at least eight former SPACs filing for bankruptcy since June 2022, roughly 100 burning cash unsustainably, and 73 trading below $1.
Third-order effects
- Kanji's either/or has largely resolved toward the pessimistic branch: with new issuance at zero by mid-2022 and public-market failures compounding, SPACs risk settling back into a niche for companies that cannot clear a conventional IPO.
- If the pattern holds, going-public routes look cyclical rather than substitutive — SPACs expand when uncertainty closes IPO windows, then contract as sponsor incentives and target quality reassert themselves, leaving retail holders of de-SPACed stock absorbing the downside.
The trend: Alternative going-public vehicles swell in dislocated markets and deflate in their aftermath, with 2020's SPAC surge and its 2022 collapse marking one full cycle.