Nearly half of all startups with less than $10M in annual revenue that went public via SPACs in 2021, mostly in tech, missed their earnings or revenue targets
Wall Street Journal : Tweets: @iamstacetheace , @sspencer_smb , @jasonzweigwsj , @carnage4life , and @markgutman9 Tweets: Stacey / @iamstacetheace : It's hard to overstate the gross incompetence of many SPACs https://www.wsj.com/... https://twitter.com/... Steven Spencer / @sspencer_smb : it's a feature. not a bug. (the people wanted investment freedom. they got it.) https://twitter.com/... Jason Zweig / @jasonzweigwsj : The lofty promises that SPAC startups can no longer keep https://www.wsj.com/... via @WSJ https://twitter.com/... @carnage4life : Details of how badly SPACs broke revenue promises taken from this WSJ article. NFT projects are the closest analog this time around. With promises they'll fund games, etc with initial revenue which clearly are pipe dreams. Caveat Emptor is always true. https://www.wsj.com/... Mark Gutman / @markgutman9 : “Incompetence” Safe Harbor has been abused and it's now a license to lie https://twitter.com/...
Context & Ripple Effects
The WSJ's finding that nearly half of sub-$10M-revenue startups that went public via SPACs in 2021 missed their earnings or revenue targets closes the loop on a story the coverage has been building all along. The structural enabler was there from the start: because a SPAC deal counts as a merger rather than an IPO, these companies faced no quiet period and could promote their stock freely — fewer restrictions on promoting stock vs. normal IPOs — which is exactly how lofty projections reached retail investors before any revenue existed to back them.
The damage was visible early: by December 2021 most VC-backed SPAC listings had already seen their stocks fall, with Metromile, View, Owlet, and Clover Health among the worst performers (worst-performing 2021 SPAC stocks), and Chamath Palihapitiya's sponsorships averaging a 50% plunge from the mid-February peak (Palihapitiya-sponsored SPACs down 50% on average). What this article adds is the accountability layer — the targets themselves were broken, not just the share prices.
First-order effects
- Investors in roughly half of the small-revenue tech SPACs of 2021 now hold companies that publicly failed to hit the very projections used to sell the deals, converting promotional forecasts into measurable broken promises.
Second-order effects
- Sponsors and bankers lose the pitch that made SPACs viable — credible forward guidance without an IPO's scrutiny — which shows up in Dealogic's data: July 2022 was the first month in five years with no new SPAC IPOs after the March 2021 peak raised over $36B (first month in five years with no new SPACs).
Third-order effects
- If the pattern holds, the SPAC pipeline becomes a distressed-assets story rather than a listing route: at least eight former SPAC companies have filed for bankruptcy since June 2022 and nearly 100 are spending unsustainably (SPAC bankruptcies since June 2022), pointing toward consolidation, delistings, and regulatory pressure to close the merger-vs-IPO disclosure gap.
The trend: The 2021 SPAC wave is completing its arc from promotion-driven listings to a default-and-consolidation cycle, with the missing quiet-period rules now the obvious regulatory target.