SPAC stocks are back

ONE of the biggest fads of the Covid-19 retail-stock trading era is making a comeback –thanks in part to two buzzy trends.

Special-purpose acquisition companies (SPACs), or blank-cheque firms, have latched onto crypto treasury companies and emerging technologies like quantum computing that are benefitting from US President Donald Trump’s “America First” rhetoric.

Some researchers are already warning that many everyday investors betting on these companies are liable to lose money.

“It all looks like turducken, where we’re just putting one thing inside of another,” says Peter Atwater, founder of Financial Insyghts, which advises institutions on consumer sentiment, financial markets and the economy. (Turducken refers to a Louisiana dish where a deboned turkey is stuffed with a duck that’s stuffed with a chicken.)

SPACs are publicly traded shell corporations that raise money from investors to do just one thing: find a private company to merge with.

Those mergers are a backdoor way to take the target company public.

SPACs exploded in popularity in 2020, but they fell out of fashion once starry-eyed corporate executives and investors began to grasp the significant costs built into these complex deals.

Tumbling stock prices – especially those of more speculative, early-stage companies – ended up wiping out billions of dollars in value for shareholders who held onto SPACs long after their acquisitions.

The lessons from that era seem to have been forgotten.

More than 110 SPACs raised US$23.3bil in the first 10 months of 2025, a far cry from the roughly US$162bil pooled across 613 in 2021, but easily outpacing the activity in the last two years combined, according to SPAC Research.

The stream of deals has maintained a solid clip, with 59 SPAC mergers inked this year through October.

Take Cantor Equity Partners Inc (CEP), one of six SPACs run by Brandon Lutnick, son of US Commerce Secretary Howard Lutnick.

CEP announced in April that it would merge with Twenty One Capital Inc to form a publicly traded Bitcoin holding company.

The stock jumped five-fold, rewarding the hedge funds that got in early. But investors who chased the eye-popping gains were quickly hit with sharp losses when the stock retreated.

Cantor and Twenty One Capital declined to comment. Shareholders are expected to vote on the deal in early December.

Crypto treasury companies-also known as digital asset treasuries (DATs) – are a bit like SPACs in that they’re mainly vehicles for investing in something else, except a DAT buys cryptocurrency instead of another firm.

When Michael Saylor popularised the trend at his software company Strategy Inc, formerly known as MicroStrategy, he used funds to stockpile Bitcoin, attracting stock investors who weren’t otherwise able to directly hold digital assets.

Treasury companies can also sell convertible debt or shares to raise money, allowing them to buy more crypto.

In a frothy market, DATs can trade for far more than the value of the crypto they hold-but those premiums can swiftly evaporate when moods shift.

For Atwater, the marriage of SPACs and crypto treasury companies is reminiscent of the collateralised debt obligations (CDOs) that helped fuel the 2008 financial crisis.

“It reminds me of the madness of the CDO world at its peak, where investment banks were trying to see what all they could repackage to sell to somebody who otherwise couldn’t buy it but wanted in on the game,” he says.

Despite the pitfalls, with stock benchmarks setting a string of record highs in October as the riskiest corners of the market soared, imitators lined up blank checks for companies to buy and hold a gamut of tokens ranging from the popular to the obscure. It helped when the deals were backed by a famous name.

In August, Trump Media & Technology Group Corp, largely owned by the president’s family, signed a SPAC deal to create a treasury company focused on accumulating CRO tokens, a lesser-known cryptocurrency used on Crypto.com’s Cronos blockchain.

Some SPACs change their ticker symbols before a deal is completed in an attempt to attract more attention.

Among nine SPACs with pending DAT-related deals, all have peeled back from their initial gains, with losses ranging from a 1.1% dip to an almost 70% decline as of Nov 12.

There are signs that the novelty of marrying blank checks and digital treasuries is petering out after crypto entered a bear market in November.

Retail investors lost an estimated US$17bil from holdings in Saylor’s Strategy by overpaying for the underlying Bitcoin held by the company, according to an October report from Singapore-based 10X Research.

The losses, tracked since the company began selling shares to buy the token, came from an overpricing of share premiums that allowed it to sell stock far above the value of its crypto holdings. Strategy didn’t respond to requests for comment.

“It’s craziness squared,” says Interactive Brokers’ Steve Sosnick.

The firm’s chief strategist, who’s been in finance for the better part of four decades, says the deals exemplify the adage that there’s often a greater fool who will pay more for an overpriced asset.

Meanwhile, SPAC investors already have their eyes on the next stock craze.

Recently, management teams have been touting deals in nuclear and quantum computing, both priorities for the Trump administration.

Outsized share gains for publicly listed peers have drawn SPAC sponsors and advisers to circle companies thought to be well-positioned to ride the next wave.

“You’re seeing a type of industry gravitate toward the SPAC transaction,” says Shari Mager, a partner with KPMG’s deal advisory practice. “Those are the types of industries that are in favour right now regardless of the type of deal.”

The best-performing SPAC in the United States this year is Churchill Capital Corp X.

The shares had gained nearly 70% as of mid-November, after Churchill announced a plan to take quantum-computing firm Infleqtion Inc public. The next day, competitor Horizon Quantum Computing Pte Ltd inked its own SPAC merger.

The flood of cash – both amateur and institutional – to unproven areas is a product of the current bull market, where everyone is searching for the next Nvidia Corp, hoping to replicate the trillions in returns generated by the frenzy around artificial intelligence.

“What’s the next big thing: Is it quantum computing, or nuclear or flying cars? Nobody knows, but this is a sign that people are feelingly invulnerable,” Sosnick says. “The more these stocks rally, the more it gets chased.”— Bloomberg