I'm no SPAC expert. When I first heard about them I wrote them off almost immediately and never had an interest to dig in any further. It seemed like the business equivalent of a subprime mortgage and it was only a matter of time before it caught up with them.
One reason that I've understood is if you're a smaller company that can't afford the whole IPO process, this is a way to get access to public markets in a simpler/faster/cheaper way.
Those justifications fit well with my subprime mortgage equivalency. Fast, easy, and cheep money for people who aren't ready and aren't willing to wait until they are ready. That throws up red flags for me and makes me wonder what else they may have cut corners on in the name of speed or cost cutting.
I think I saw in another comment that it may be due to investors looking to get their money out, so maybe there is pressure there. I understand investors not wanting to take 10 years to see returns, but not if it comes at the expense of the business. I don't know all the ethics around startup investing, but if we start seeing a lot of these business go south (significantly more than traditional IPOs), a line may have been crossed. This could be a means to shift what used to be pre-IPO investment risk over to public investors if things start to look shaky internally. Again, I'm not expert, just spitballing.
The IPO process is incredibly burdensome. You basically can't tap public equity markets without being a very large business. Otherwise you can't justify the time and expense.
I see the similarity to sub-prime mortgages, but the differences are: 1) this is the stock market so I don't think anyone doesn't understand the risks, 2) SPACs are no where big enough to drag down the rest of the market.
Before SPACs, companies would do reverse mergers. A basically bankrupt public company "buys" a private company and merges. Swap the private equity for public and now you're a public company with far less hassle than an IPO.
It does seem like the IPO process is a proxy for “are you mature enough to handle a large sum of money?”. Thus the SPAC ends up being a way to throw money at immature people who then piss it all away.
Hardware-heavy companies (e.g. a lot of the new space companies) need the level of investment that you can only really get from public markets, but are still quite small companies from the perspective of people here. For example, they might be less than 100 employees but still need half a billion dollars to procure satellite testing and launch services to scale up a constellation they're launching. SPACs have been useful for this purpose.
(I have no idea how these space companies are faring now, and what side of the statistic they represent.)
I think it's to early for all those SPACed aerospace companies to tell. It does seem so that a lot of the newer ones are to a large extend just benefiting from the hype SpaceX started and companies like Joby and Lilium carried forward. Whether any of those without a final product will actually fly, and if there is a market to serve, is the big unknown here.
Hardware-heavy companies (e.g. a lot of the new space companies) need the level of investment that you can only really get from public markets, but are still quite small companies from the perspective of people here. For example, they might be less than 100 employees but still need half a billion dollars to procure satellite testing and launch services to scale up a constellation they're launching. SPACs have been useful for this purpose.
So have governments. The entire US space industry has to be viewed in terms of budget reductions for federal aerospace, in terms of privatization.
I'm no SPAC expert. When I first heard about them I wrote them off almost immediately and never had an interest to dig in any further. It seemed like the business equivalent of a subprime mortgage and it was only a matter of time before it caught up with them.