Is the SPAC mechanism a fundamentally sound path to going public, or is it structurally flawed?

Emil Michael · Oct 24, 2022

SPACs are over and will retreat to being a backwater financial product rather than a mainstream one

SPACs are financial engineering rather than dealmaking, and financially engineered products collapse when the market collapses; the product was only ever a backwater instrument that got briefly mainstreamed

56:59 20VC: Uber's Journey to Becoming the Most Valuable Private Tech Company in History, Raising $3BN From Saudi in Just 60 Days, Uber's $30BN Mistake in Food Delivery, Why Recent Uber M&A Will be the Worst in Tech & Mastering Negotiations and Deal-Making with

Emil Michael · Oct 24, 2022 · hedged

Roughly 90% of the SPACs launched in 2021 that never found a merger target will disband and return capital to investors over the next eighteen months

SPACs must find a company to merge with, and those that didn't are dead in the current market

Scope: 'maybe 90%'; applies to 2021-vintage SPACs without a target

57:59 20VC: Uber's Journey to Becoming the Most Valuable Private Tech Company in History, Raising $3BN From Saudi in Just 60 Days, Uber's $30BN Mistake in Food Delivery, Why Recent Uber M&A Will be the Worst in Tech & Mastering Negotiations and Deal-Making with

Bill Gurley · Dec 6, 2021

SPACs are worse than direct listings but better than traditional IPOs, and only had their moment because of significant IPO underpricing

SPACs gave founders and CEOs more control; a stock popping 50-70% on IPO is a far bigger cost than SPAC fees, which opened the window

27:54 Spacs are worse than direct listings but better than traditional ipos because ipo underpricing created the opening

Michael Eisenberg · Dec 6, 2021

SPACs should be judged from the common shareholder's perspective, where they can be clearly good even for pre-revenue companies

Some of these companies would have taken much longer to go public or never gone public at all, and going public via SPAC removes giant liquidation preferences sitting on top of common shareholders; the counterfactual for those holders was likely nothing good

29:19 Spacs benefit common shareholders by removing liquidation preference overhang even for pre revenue companies

Brad Gerstner · Oct 10, 2022

The Grab SPAC was a mistake of execution, not concept — committing to a price in April and not getting public until December straddled the biggest interest rate change in thirty years.

In a SPAC or IPO you commit to buying at a price; when the cost of capital moved, multiples radically changed, so the eight-month delay destroyed the underwriting.

40:00 Spac mechanism is fine execution timing mismatch with rate changes caused the failure

Brad Gerstner · Oct 10, 2022

SPACs don't need to exist as a permanent structure, but they were valuable because they forced innovation in direct listings and easier paths to the public markets

What matters is that founders of iconic businesses get a fair and easy step into public markets rather than a Byzantine process; SPACs were just one mechanism toward that

60:55 Spacs valuable as a forcing function for easier ipo paths not a permanent necessary structure

Jason Wilk · Apr 21, 2025

The SPAC structure is a fundamentally sound way to go public, especially for younger companies going out early

You raise a guaranteed amount of capital at a set valuation through the PIPE, so you know your capital and dilution up front, versus a traditional IPO where you don't know size or price until the market-making process at the end of a nine-to-twelve month S-1 build

14:36 Spac guarantees capital and valuation upfront especially for young companies

Jason Wilk · Apr 21, 2025

SPACs became a poisonous word purely because of the volume of low-quality companies that used them during the zero-interest-rate era, not because of any flaw in the mechanism

With easy access to capital, companies with barely any revenue or business model went public via SPAC, overshadowing the good businesses that used the same route

15:46 Spacs became toxic due to low quality issuers not a mechanism flaw

Chamath Palihapitiya · Jul 13, 2020

Running SPACs well requires a rare cross-section of skills that very few people possess

Each deal is bespoke and handcrafted; you must be capital-markets savvy and a decent investor while also acting as a translational layer that explains the product and technology and coaches the CEO through becoming public

27:49 Spac success requires a rare cross disciplinary skill set most sponsors lack