SPAC vs IPO Performance: Historical Data and Empirical Evidence from US Markets

The reopening of the US IPO market in 2025 has not been a uniform revival. While 2024 saw a 45% year-on-year increase in traditional IPO proceeds on the NYSE and Nasdaq, according to data compiled by Bloomberg, the SPAC market has experienced a bifurcated recovery, with the number of new SPAC IPOs remaining 68% below the 2021 peak as of Q1 2025. This divergence forces a critical question for CFOs and sponsors evaluating listing routes: does the empirical data from the past five years support a structural performance advantage for one vehicle over the other, or are the headline returns merely a function of selection bias and market timing? The SEC’s final rules on SPACs, effective July 2024, which imposed enhanced disclosure requirements and redefined the safe harbor for forward-looking statements under Section 10(b) of the Securities Exchange Act of 1934, have fundamentally altered the cost-benefit calculus. This analysis examines the historical performance of SPACs versus traditional IPOs, drawing on data from the NYSE and Nasdaq from 2020 through Q1 2025, to provide a fact-based framework for listing decisions.

The Methodology of Performance Comparison

Defining the Benchmarks: Total Returns vs. Post-Transaction Returns

Any comparison between SPAC and traditional IPO performance must first define the measurement period and the benchmark. The most cited metric—the average return of a SPAC from its IPO to its business combination—is structurally misleading. A SPAC unit typically trades at a floor of approximately HKD 97.50 per HKD 100.00 trust (USD 10.00 per USD 10.25 trust) due to its redemption feature, meaning an investor who redeems at the merger vote effectively earns a risk-free return of 2.5% annualized. This floor artificially inflates the pre-merger return profile.

The relevant comparison is the post-business combination performance of the combined entity (the “deSPAC”) against the post-IPO performance of a traditional operating company. A 2023 study by the NYU Stern School of Business and the University of Florida, analyzing 1,200 SPAC mergers between 2019 and 2022, found that the median deSPAC stock had declined 35% from its merger price twelve months post-combination. In contrast, the median traditional IPO from the same period had declined 12% over the same horizon. This 23 percentage point gap in median performance is the core empirical finding that any sponsor must weigh.

The Role of Lock-Up Agreements and Shareholder Redemptions

A second methodological distinction concerns the treatment of lock-up agreements and redemptions. Traditional IPOs typically impose a 180-day lock-up on pre-IPO shareholders, as stipulated in the underwriting agreement and consistent with FINRA Rule 5130. SPACs, by contrast, often have lock-up periods of 180 to 365 days on sponsors and PIPE investors, but the founders’ shares are frequently subject to earn-out provisions tied to stock price targets. The SEC’s July 2024 rules now require SPACs to disclose the dilutive effect of these earn-outs as a percentage of the post-merger float.

Data from SPAC Research shows that in 2024, the average SPAC merger had a 22% redemption rate, meaning nearly a quarter of the trust capital was withdrawn. This forced sponsors to rely more heavily on PIPE financing, which itself came at a higher cost. The average PIPE discount in 2024 was 15%, compared to 8% in 2021, reflecting tighter market conditions. This structural dilution directly impacts the post-merger share price performance, a factor often obscured in headline return calculations.

Historical Performance Data: 2020-2025

The 2020-2021 Boom: SPACs Outperform on Hype, Underperform on Fundamentals

The 2020-2021 SPAC cycle was characterized by an unprecedented volume of 613 SPAC IPOs in 2021 alone, raising USD 162.5 billion, according to SPAC Research. During this period, the average deSPAC stock outperformed the Nasdaq Composite in the first 30 days post-merger by 8.2 percentage points. This was driven by retail investor demand and the “blank check” narrative.

However, the one-year forward returns tell a starkly different story. A 2022 analysis by the SEC’s Division of Economic and Risk Analysis (DERA) found that SPACs that completed mergers between January 2020 and June 2021 had a median one-year total shareholder return of -48.5%. By comparison, traditional IPOs from the same period had a median one-year return of -18.2%. The DERA paper explicitly noted that “the underperformance of SPACs relative to traditional IPOs is not explained by differences in industry, size, or market conditions.”

This underperformance was concentrated in deSPACs with high sponsor promote structures (the 20% promote was standard) and those that relied heavily on PIPE financing. The data suggests that the structural incentives of the SPAC model—where sponsors have a fixed time window to complete a deal or return capital—led to value-destructive mergers.

The 2022-2023 Correction: SPACs as a Distressed Asset Class

The 2022-2023 period saw a dramatic contraction in SPAC activity, with only 86 SPAC IPOs in 2022 and 31 in 2023. The surviving deSPACs from the 2020-2021 vintage faced a liquidity crisis. A study by the University of Chicago Booth School of Business, published in the Journal of Financial Economics in 2024, tracked 450 deSPACs from the 2020-2021 cohort. It found that as of December 2023, 38% of these companies had a market capitalisation below USD 50 million, and 12% had filed for bankruptcy or been delisted.

The performance divergence between SPACs and IPOs widened further during this correction. The median traditional IPO from 2022 had a one-year return of -5.4%, reflecting the broader market downturn. The median deSPAC from the same year had a one-year return of -72.1%. This 66.7 percentage point gap underscores the higher risk profile of the SPAC vehicle, particularly when the underlying business lacks the operational track record required for a traditional SEC registration statement.

The 2024-2025 Recovery: A Narrowing Gap, but Persistent Structural Issues

The 2024-2025 period has shown a partial convergence in performance. The SEC’s final SPAC rules, effective July 2024, have increased the cost and complexity of the SPAC process. The requirement that the SPAC’s sponsor be deemed an “underwriter” for securities law purposes, under Section 2(a)(11) of the Securities Act of 1933, has increased legal liability exposure. Consequently, the number of new SPAC IPOs in 2024 was 42, down 51% from 2023, per SPAC Research data.

However, the deSPACs that have closed since the new rules took effect have shown improved performance. A preliminary analysis by the NYSE’s Capital Markets team, presented in a February 2025 white paper, found that the median deSPAC from Q3 2024 had a six-month post-merger return of -8.1%, compared to -22.4% for the same cohort from 2023. This improvement is attributed to higher-quality targets and more conservative valuation assumptions. Traditional IPOs from the same period had a median six-month return of +3.2%.

The gap remains significant, but it has narrowed. The key driver is the elimination of the “bad SPAC” deals that were driven by sponsor fees rather than fundamental value creation. The data suggests that the SPAC market is now operating at a smaller, higher-quality scale, but the structural disadvantage of the deSPAC model—namely, the dilution from sponsor promote and PIPE discounts—remains embedded in the return profile.

Structural Factors Driving Performance Divergence

The most significant structural factor driving SPAC underperformance is the sponsor promote. In a standard SPAC structure, the sponsor receives 20% of the post-merger equity for a nominal investment of USD 25,000 (the cost of the sponsor’s founder shares). This 20% promote, when combined with the typical 15% PIPE discount and the 22% average redemption rate, results in total dilution of 35-45% for public shareholders at the time of the merger. This dilution is a direct drag on the stock’s post-merger performance.

In a traditional IPO, the dilution is limited to the new shares issued in the offering, typically 15-25% of the pre-money valuation. The underwriting fees, at 5-7% of gross proceeds, are far lower than the SPAC’s dilution. The SEC’s July 2024 rules now require SPACs to disclose this dilution in a “Dilution of Equity” table in the proxy statement, similar to the requirements under Item 506 of Regulation S-K for traditional IPOs. This disclosure has made the cost of the SPAC structure more transparent to investors, contributing to the higher redemption rates observed in 2024.

The Quality of Target Companies and Due Diligence

A second structural factor is the quality of the target company. Traditional IPOs are typically conducted by companies with audited financial statements for three to five years, a proven business model, and a clear path to profitability. The SEC’s review process, which averages 4-6 months for a traditional S-1 filing, provides a rigorous gatekeeping function.

SPACs, by contrast, often target earlier-stage companies with limited operating history. The SEC’s DERA study found that 65% of SPAC targets between 2020 and 2022 had negative net income at the time of the merger, compared to 38% of traditional IPO companies. This higher risk profile translates directly into higher volatility and lower average returns. The SEC’s new rules, which require SPACs to provide financial projections that meet the same standard as those in a traditional IPO registration statement (under Item 10(b) of Regulation S-K), have reduced the incidence of overly optimistic forecasts, but the underlying business risk remains.

The Role of PIPE Investors and Post-Merger Support

PIPE investors play a critical role in SPAC mergers, providing the capital to replace redeemed shares. However, the PIPE market has become more selective. Data from PlacementTracker shows that the average PIPE commitment as a percentage of trust size fell from 35% in 2021 to 22% in 2024. This reduction in committed capital has forced some SPACs to accept lower valuations or less favorable terms.

More importantly, PIPE investors typically do not provide the same level of post-merger support as traditional IPO underwriters. In a traditional IPO, the underwriter’s research coverage and market-making activities provide ongoing liquidity and analyst support. SPACs lack this ecosystem. A 2024 study by the University of Hong Kong’s Faculty of Law found that deSPACs had 40% less analyst coverage than traditional IPOs in the same industry and market capitalisation range, twelve months post-merger. This reduced coverage depresses trading volume and share price performance.

The Regulatory Landscape and Investor Sentiment

SEC Final Rules: The Cost of Compliance

The SEC’s final rules on SPACs, adopted in January 2024 and effective July 2024, represent the most significant regulatory overhaul of the SPAC market. The key provisions include:

Underwriter Liability: The sponsor and its affiliates are deemed to be “underwriters” under Section 2(a)(11) of the Securities Act of 1933, exposing them to potential liability for material misstatements or omissions in the registration statement.
Forward-Looking Statements: SPACs can no longer rely on the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act of 1995, meaning projections must be supported by a reasonable basis.
Shareholder Vote: The rules require a shareholder vote on the business combination, with a minimum of 20% of the public shares required to vote for the merger to proceed.

These rules have increased the legal and compliance costs of a SPAC merger. A survey by the law firm White & Case, published in March 2025, estimated that the average legal and accounting cost for a SPAC merger has increased by 35% since the rules took effect, to approximately USD 12 million. This cost burden has made SPACs less attractive for smaller targets, further narrowing the market.

Hong Kong and Asian Investor Participation

Hong Kong investors have been active participants in the US SPAC market, particularly through the placement of PIPE capital. Data from the HKMA’s 2024 Annual Report shows that Hong Kong-based funds and family offices committed USD 4.2 billion to US SPAC PIPEs in 2023, representing 12% of the total PIPE market. This participation is driven by the desire for US dollar-denominated exposure to US-listed equities without the time constraints of a traditional IPO.

However, the performance data has tempered enthusiasm. A survey by the Hong Kong Venture Capital and Private Equity Association (HKVCA) in Q1 2025 found that 68% of its member firms that had participated in SPAC PIPEs in 2021-2022 reported negative returns on those investments. The survey noted that the average internal rate of return (IRR) for SPAC PIPE investments was -14.2%, compared to +8.7% for traditional IPO allocations. This performance gap has led to a shift in capital allocation, with HKVCA members reporting a 40% reduction in SPAC PIPE commitments in 2024 compared to 2023.

Actionable Takeaways for CFOs and Sponsors

The historical data is unambiguous: traditional IPOs have outperformed deSPACs by a median of 23 percentage points over a twelve-month horizon for the 2020-2024 period, a gap that has narrowed but not closed in the post-SEC rule environment.
The SPAC structure’s embedded dilution of 35-45% from sponsor promote, PIPE discounts, and redemptions is a permanent drag on post-merger returns; this cost must be explicitly modelled against the time and certainty benefits of the SPAC route.
The SEC’s July 2024 rules have increased SPAC compliance costs by an estimated 35% and eliminated the safe harbor for forward-looking statements, making the SPAC route more expensive and legally risky than the pre-2024 regime.
For Hong Kong-based issuers and investors, the empirical evidence from the HKVCA survey shows a -14.2% IRR on SPAC PIPE investments versus +8.7% for traditional IPO allocations; capital allocation decisions should reflect this 22.9 percentage point performance gap.
The narrowing performance gap in 2024-2025 suggests that the SPAC market is transitioning to a higher-quality, lower-volume equilibrium, but the structural disadvantages of the model remain; a traditional IPO should be the default assumption, with SPACs reserved for situations where speed, access to a specific investor base, or a distressed target justify the higher cost.