The Ups and Downs of SPACs

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Special purpose acquisition companies (SPACs) seemingly exploded onto the scene in 2020 and early 2021. The volume and activity of SPACs soared, driven by spectacular returns, lots of hype, low interest rates, and celebrity endorsements. SPACInsider, a popular resource for SPAC data and deals, reported 613 SPAC initial public offerings (IPOs) raising $162 billion during 2021, up from 59 SPAC IPOs raising $13 billion in 2019. Yet activity plummeted during 2022, with annual volume decreasing to only 76 SPAC IPOs raising $12 billion by mid-September. What brought about this sudden emergence (and decline), and what do management accountants and their companies need to know and keep in mind when considering the use of a SPAC? Let’s take a look.