The SPAC Hangover: Lessons from the Blank Check Boom

When SpaceX listed on Nasdaq on June 12 at a $1.75 trillion valuation, Gulf sovereign wealth funds moved fast. Saudi Arabia's Public Investment Fund and the Kuwait Investment Authority each placed orders worth between $1 billion and $5 billion. The Qatar Investment Authority signalled a substantial commitment of its own. The message from the Gulf was unambiguous: serious capital still chases serious companies. What it no longer chases — and what four years of wreckage have confirmed — is the blank check. The SPAC era is over. What it leaves behind is a masterclass in how not to bring private companies to public markets, and a set of hard-won lessons that every family office, private investor, and emerging market capital allocator should carry.

The Anatomy of a Mania

Between 2020 and 2022, Special Purpose Acquisition Companies raised more than $250 billion in the United States alone. At the peak in 2021, over 600 SPACs launched in a single year. The premise was seductive. A sponsor raises capital through an IPO shell, then has two years to find a merger target — effectively taking a private company public without the scrutiny of a traditional listing. For retail investors, it offered access to pre-IPO-style deals. For sponsors, it offered handsome promote structures — typically 20% of the SPAC's equity — regardless of whether the deal performed. For the companies being acquired, it offered speed and a locked-in valuation at a moment when growth multiples were historically inflated by near-zero interest rates.

The unwinding has been brutal. Of the roughly 700 SPAC mergers completed between 2020 and 2023, the median post-merger share price decline exceeded 60% within 18 months of closing. Dozens of companies that went public via SPAC have since filed for bankruptcy or been delisted. The SEC's sweeping disclosure reforms, introduced in 2024, arrived late but landed hard — raising liability standards for the forward projections that SPAC targets had previously used to justify stratospheric valuations with near impunity.

What Went Wrong, Structurally

The SPAC structure contained several features presented as innovations that functioned, in practice, as misaligned incentives dressed in sophisticated language. The sponsor promote — that 20% equity stake awarded at minimal cost — meant deal completion was always more financially attractive to sponsors than deal quality. Sponsors who failed to close a merger returned capital to investors and walked away with little more than opportunity cost. Those who closed, even disastrously, captured significant value regardless of what happened to ordinary shareholders after the fact. That asymmetry was not a bug. It was the design.

Redemption mechanics made it worse. Institutional investors who purchased SPAC units could redeem their shares at trust value before a merger closed, locking in a risk-free return while leaving retail holders fully exposed to post-merger volatility. The sophisticated got out whole. The uninformed absorbed the losses. Regulators in both the US and UK have since moved aggressively to address this. The UK's Financial Conduct Authority introduced revised SPAC rules in 2021 requiring shareholder approval for individual acquisitions — a far more protective standard that kept the UK's SPAC market smaller but substantially cleaner. Few outside London's regulatory community paid close attention at the time. They should have.

The Gulf's Measured Distance — and What It Reveals

GCC capital markets largely sidestepped the worst of the SPAC mania. Not through regulatory foresight alone — the region's listing ecosystem was already undergoing a different kind of transformation, one grounded in fundamentals rather than financial engineering. Saudi Arabia's Tadawul and the Abu Dhabi Securities Exchange were deepening their domestic IPO pipelines through state-linked privatisations and family conglomerate listings. The emphasis was on earnings visibility, dividend capacity, and institutional anchor demand. That is a different culture entirely from the projection-driven, narrative-first approach that defined the SPAC boom in New York.

That discipline is now being tested. Mutlaq Al Ghowairi Contracting Company pulled its planned Tadawul listing at the last moment in early June, citing market conditions following regional geopolitical disruption. Arabian Dyar and Dubai Investment Parks have similarly pushed to the second half of 2026. But the institutional response to these delays tells a very different story from the SPAC collapse. These are orderly postponements, not structural failures. Hamza Girach, Head of MEA Investment Banking at Citi, was direct about it in June: "we are not seeing any slowdown in planning among Saudi IPOs," he said, adding that the UAE pipeline retained enough fundamental strength to absorb the current pause. HSBC's Selim Kervanci echoed that view, noting the bank holds 45 active GCC mandates and expects deal flow to restart meaningfully in Q4 following the US-Iran peace agreement. The Abu Dhabi Securities Exchange and Dubai Financial Market both reached three-month highs within days of the 14-point memorandum of understanding being disclosed. That is not the behaviour of a market built on blank checks.

Lessons for Family Offices and Private Capital Allocators

For private wealth across the Gulf, Central Asia, and Southeast Asia, the SPAC episode delivers four specific lessons that should reshape how alternative exposure to pre-IPO and growth equity gets structured.

First, valuation discipline cannot be outsourced to narrative. SPAC targets routinely presented five-year revenue projections with no relationship to their actual operating history. Family offices that participated in SPAC PIPEs — the private investments in public equity that accompanied many SPAC mergers — frequently did so on the basis of management presentations rather than audited financial substance. The SpaceX IPO drew credible sovereign and institutional capital for the opposite reason: the company's revenue, launch cadence, and Starlink subscriber base were verifiable and growing. The numbers spoke for themselves.

Second, sponsor alignment matters as much as deal structure. Any vehicle in which the general partner profits from closing a transaction — irrespective of that transaction's quality — contains a structural fault. Whether the vehicle is a SPAC, a leveraged buyout with excessive fee layers, or an emerging market fund with opaque carry arrangements, the principle holds. Ask who gets paid when the deal closes, not when it performs.

Third, regulatory arbitrage is not a durable edge. Many SPAC sponsors explicitly marketed the forward-projection exemption as a feature. When the SEC closed that exemption, the primary competitive advantage of the structure evaporated alongside it. Investors in any vehicle whose returns depend on a regulatory loophole rather than underlying value creation are exposed to sudden obsolescence. That exposure rarely appears on a term sheet.

Fourth, liquidity terms shape outcomes more than investors acknowledge in bull markets. The SPAC structure let institutional investors exit at par while retail investors absorbed the full downside. Understanding the complete waterfall — who gets paid, in what order, under what conditions — is not administrative detail. It is the investment itself.

What Comes Next

The successor to the SPAC era will not be a single instrument. It will be a return to patient, diligence-intensive private capital formation: direct listings with institutional anchor commitments, continuation funds that extend holding periods without forcing premature exits, and sovereign co-investment structures of the kind being refined across Riyadh, Abu Dhabi, and Doha. The Gulf's current IPO pause is a recalibration, not a retreat. For families and institutions building portfolios across emerging markets, the SPAC hangover is not a cautionary tale about equity markets broadly. It is a precise warning about the price of mistaking financial structure for business quality. The blank check era confirmed that lesson at a cost of tens of billions of dollars. It does not need to be learned twice.