• AI infrastructure, power, quantum among key focus areas
• At least 260 blank check vehicles actively seek targets

The revival of the US IPO market is bringing special purpose acquisition companies (SPACs) back into focus as a funding source for earlier-stage, capital-intensive companies in sectors such as AI infrastructure, power generation, and quantum computing, according to advisers and sponsors.

Market participants said the current SPAC cycle differs markedly from the 2020-2021 boom, with stronger regulation, fewer vehicles searching for targets, and investors placing greater emphasis on business fundamentals.

In addition, the recovery in traditional IPO issuance has improved sentiment toward SPACs, according to Andrejka Bernatova, CEO and chairman of Dynamix III,  a blank check company pursuing energy, power, and digital infrastructure merger targets.

“The IPO market has been considerably stronger over the last six to 12 months, and that’s helping the SPAC business,” Bernatova said.

Joel Rubinstein, a partner at White & Case, agreed that SPAC activity tends to recover alongside broader equity capital markets.

“At the end of the day, it’s simply another route to becoming a public company,” Rubinstein said. “When public markets are open, you’ll generally find that the SPAC market is open as well.”

If IPO issuance weakens, however, SPACs could become more attractive because they offer companies greater certainty around valuation and execution, Bernatova added.

Strongest issuance since 2021

The rebound is already evident in issuance volumes.

There have been 135 SPAC IPOs in the US so far this year, according to Dealogic.

“We have not seen that type of momentum in SPAC IPOs since 2021,” said Mike Bellin, a partner at PwC.

Bellin attributed the recovery to three factors: experienced sponsors returning to the market, increased equity market volatility that makes negotiated valuations more attractive, and improved performance among recent de-SPAC companies.

“We’ve seen a lot of quantum companies go public via de-SPAC — they’ve traded very well,” Bellin said. “We’re seeing a lot of energy companies look to go public via SPACs, like small nuclear reactors, and they’re doing very well in this market.”

“The trend today is around quality, and it’s not all pinned on hopes and dreams of a future story.”

Pricing certainty a key differentiator

Rubinstein said companies choosing between a traditional IPO and a SPAC are increasingly selecting the structure that best fits their circumstances rather than whichever option appears more expedient.

Under a conventional IPO, underwriters build an order book and determine pricing after investor demand has been tested.

By contrast, SPAC mergers allow companies to negotiate valuations directly with sponsors before launching the transaction.

“The ultimate test is still whether public investors support that valuation,” Rubinstein said. “A sponsor can agree to almost any valuation, but if investors don’t support it, the transaction won’t succeed.”

Private investment in public equity deals offer another important advantage where available, he noted. Companies that successfully secure PIPE commitments know both the valuation and amount of capital they will receive before closing.

Shari Mager, capital markets readiness leader at KPMG, agreed that SPACs continue to fill an important role alongside traditional IPOs and, to a lesser extent, direct listings.

“The more types of transactions and paths to going public that companies have access to, the more robust the market becomes,” Mager said.

Boost Run demonstrates investor appetite

AI infrastructure companies increasingly fit the SPAC model because they combine substantial capital requirements with early-stage growth profiles that can prove difficult to market through conventional IPOs, advisers said.

Mager said AI infrastructure businesses are particularly attracted to SPACs because a de-SPAC transaction may provide investors with greater visibility into management’s expectations for future performance through the inclusion of financial projections.

“They’re competing with private equity and private credit too, but the SPAC model brings real benefits around funding for AI infrastructure companies specifically,” Mager said.

One transaction that illustrates improving investor sentiment is Boost Run, which merged with Willow Lane Acquisition in May.

Its stock is trading more than 80% higher than the SPAC’s pre-merger price, though down from its June highs, when the share price had more than tripled in value.

“It is the first de-SPAC that I can actually remember where we had zero redemption,” said JBG Capital Advisory founder Jeff Bernstein, who worked on the transaction.

He attributed investor demand to the company’s differentiated business model. Rather than constructing data centers, Boost Run installs high-performance servers inside existing facilities, avoiding the heavy capital expenditures required by larger AI cloud providers.

“They don’t build data centers. They put servers in existing data centers,” Bernstein said. “They have no debt, free cash flow margins of around 70%, and because capacity is constrained, they receive significant customer prepayments.”

Investors have become increasingly interested in alternative AI infrastructure providers amid concerns over the capital intensity of larger operators, Bernstein said.

“We’ve had episodes where investors became worried about the balance sheets of companies like CoreWeave, but investors remain resilient,” Bernstein said. “I think they’re looking for alternatives beyond the hyperscalers and the large neo-cloud providers.”

Boost Run pursued a SPAC merger because its trailing 12-month revenue was below USD 25m, making a traditional IPO significantly more challenging, he added.

Healthier competitive landscape

Market participants said today’s SPAC market bears little resemblance to the previous bullish cycle.

While there are at least 260 US-listed SPACs actively seeking targets today that have not announced business combinations, according to Dealogic, during the 2021 boom, there were more than 600 SPACs created in just one year.

“We’re not seeing oversaturation in conversations,” Dynamix III’s Bernatova said.

Instead, sponsors with operational expertise and demonstrated records of creating shareholder value are increasingly winning mandates, she said.

PwC’s Bellin agreed that sponsor quality has become a defining feature of the current market.

“These are seasoned SPAC issuers,” he said. “These are companies that understand SPACs and understand good target companies.”

Tighter regulation and more sophisticated investors have produced a healthier SPAC ecosystem, the market participants said.

“The uptick in SPAC activity is good for the market overall because we’ve moved past the unease from the 2020-21 SPAC boom,” KPMG’s Mager said.

“There’s more regulation now, investors are savvier about what to look for, and we’re seeing more blue-chip investors doing deals. The environment is more controlled.”

White & Case’s Rubinstein said stock exchanges and regulators now apply greater scrutiny to companies’ projected post-merger cash balances. During the previous boom, some businesses completed transactions despite receiving minimal proceeds due to heavy redemptions.

The decline in the number of US-listed companies is a greater long-term concern than the existence of SPACs, Rubinstein said.

Public markets provide greater transparency than private ownership while allowing retail investors to participate in innovation across emerging industries including AI infrastructure, quantum computing, and nuclear energy, he said.

“I’d rather see more companies become public. Once companies provide complete and truthful disclosures, they should have access to the public markets.”