Though experts agree the IPO market is heating up, one segment is being left in the cold: special purpose acquisition companies, or SPACs, which are publicly traded shell companies with a mandate to acquire a private firm. SPACs provide a back door of sorts to the public markets, and while they were wildly popular in 2021, the model is now languishing as SPACs accounted for only 6.3% of the $8.4 billion raised by IPOs in the first quarter of 2024. A Renaissance Capital Q1 2024 Quarterly Review also shows SPACs in that time have averaged a dismal return of –49%.
One company undeterred by these figures is Mission Space Acquisition Corp., which filed its S-1 on Thursday with the Securities and Exchange Commission. The SPAC, a subsidiary of Delaware-based Mission Space Sponsor, plans to float shares on the NYSE as a blank check company with the goal of merging with a firm in a field related to aerospace and defense.
“Over the last decade, there has been a steady increase in the demand for space-based services and applications for both the private sector as well as various government agencies,” reads the S-1, which also notes that the company will trade under the ticker symbol MISNU.
Incorporated in the Cayman Islands, Mission Space Acquisition Corp. is putting 10,000 shares in the market to raise $100 million. The company said in its filings that it is looking for firms with a value of between $500 million to $1 billion and focusing on areas such as satellites, space exploration, and space tourism, among others.
In the past, the SPAC approach has provided a fast track to the public markets compared with traditional or operational IPOs, and they also require less disclosure from the merging companies.
At the height of their popularity in 2021, SPACs accounted for around 60% of the more than 1,000 IPOs filed that year and about 50% of the $286 billion raised, according to Nasdaq data. That number fell to 31 SPAC IPOs in 2022 and has since continued this downward trend.
“The SPAC frenzy that we saw in 2020 and 2021 effectively just disappeared at this point,” said Avery Marquez, an assistant portfolio manager at Renaissance Capital.
Marquez prepared Renaissance’s review of the IPO market for the first quarter of 2024, which showed only six SPAC IPO filings, collectively raising $614 million. By comparison, the 30 operational IPOs that filed in Q1 raised $7.8 billion.
“We have returned to the point where SPACs were before [the pandemic],” Marquez noted. “Where the companies that are choosing to go public via SPAC are largely very small, maybe not really IPO quality, and SPACs are kind of the only option that they have to go public.”
One SPAC-related firm that has made a splash is Donald Trump’s social media platform Truth Social. On March 22 its owner, Trump Media & Technology Group, merged with blank-check company Digital World Acquisition Corp. and four days later had its first trading day on the Nasdaq under the symbol DJT.
The first trading day was a success, with prices soaring to $79. However, when the company disclosed that Trump Media saw $58 million in losses in 2023, the stock began to tank, trading for under $30 per share on April 12.
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