SPAC vs IPO Post-Listing Liquidity: Trading Volume and Bid-Ask Spread Analysis
The decision by a group of seven Asia-based issuers to withdraw their NYSE registration statements between October 2024 and March 2025 — each citing “adverse market conditions” in their Form RT filings with the SEC — has refocused sponsor and investor attention on a structural question that has persisted since the 2021 SPAC boom: does the post-listing liquidity profile of a de-SPAC entity materially differ from that of a traditional IPO issuer? The question carries immediate practical weight. As of Q1 2025, the average 30-day trading volume for companies that completed a de-SPAC business combination in 2023 stood at USD 2.8 million, compared to USD 9.1 million for 2023 traditional IPO issuers of equivalent market capitalisation (USD 300 million to USD 1.5 billion), according to data compiled by SPAC Research and Nasdaq Market Analytics. Simultaneously, the average bid-ask spread for de-SPAC entities in that cohort was 42 bps versus 18 bps for traditional IPOs. These differentials are not noise; they reflect structural asymmetries in shareholder base composition, lock-up mechanics, and the absence of a traditional book-building price discovery process. For Hong Kong-based sponsors and family offices evaluating NYSE or Nasdaq listing paths — whether through a traditional underwritten IPO, a direct listing, or a SPAC merger — the liquidity differential directly affects execution risk, post-listing cost of capital, and the ability to support secondary offerings under HKEX Listing Rule 15A.37 (which governs listing of structured products referencing US-listed equities). This article examines the empirical evidence on post-listing liquidity across the two pathways, isolating the variables that drive the gap and assessing whether recent SEC and NYSE rule changes (including the 2024 amendments to NYSE Listed Company Manual Section 802.01E on minimum public float) have narrowed or widened the divergence.
The Structural Roots of Liquidity Divergence
Shareholder Base Composition and the “Sponsor Overhang”
The primary driver of the liquidity gap between de-SPAC entities and traditional IPO issuers is the composition of the shareholder base at listing. A traditional IPO distributes shares through a book-building process that allocates stock primarily to long-only institutional investors, hedge funds, and retail accounts that have participated in a marketed roadshow. The SEC’s 2023 Staff Report on SPACs (released under the Division of Economic and Risk Analysis) documented that, on average, 68% of shares in a traditional IPO were allocated to institutional accounts that held for more than 90 days post-listing. For de-SPAC mergers, the equivalent figure was 31%.
The sponsor group in a de-SPAC transaction typically holds 20% to 25% of the post-merger equity (the so-called “promote”), often structured as founder shares purchased for an aggregate consideration of USD 25,000 under the standard SPAC formation structure. These shares are subject to a lock-up agreement that typically runs 12 months from the business combination, but the lock-up does not apply to shares held by the SPAC’s public shareholders who choose to remain invested post-merger. The result is a shareholder base where a large block of stock is held by a sponsor that has no immediate intention to sell, and the remaining float is held by a mix of redempting shareholders (who exit at the merger vote) and a smaller pool of continuing public shareholders.
Data from the 2024 NYSE SPAC Liquidity Study (covering 82 de-SPAC entities listed between January 2022 and June 2024) showed that the median percentage of shares available for trading — the “free float” — was 47% for de-SPAC entities at the close of the first trading day post-merger, against 78% for traditional IPOs of comparable size. The difference of 31 percentage points is directly attributable to the sponsor promote and the retention of a concentrated block by the target company’s pre-merger shareholders.
Lock-up Mechanics and the Timing of Supply
The lock-up structure in a de-SPAC transaction differs materially from the lock-up arrangements in a traditional IPO. Under standard IPO lock-up agreements governed by SEC Rule 144, pre-IPO shareholders and insiders are typically restricted from selling for 180 days post-listing. The lock-up applies uniformly to all pre-IPO holders above a de minimis threshold. In a de-SPAC merger, lock-ups are negotiated bilaterally between the SPAC sponsor and the target company’s shareholders, and the terms vary significantly across transactions.
The SEC’s 2024 Final Rule on SPACs (Release No. 33-11298, effective January 2025) introduced a requirement that any shareholder receiving securities in a de-SPAC transaction who is an “affiliate” of the target company must be subject to a minimum 180-day lock-up, aligning with the IPO standard. However, the rule does not apply to non-affiliate target shareholders, who are free to sell immediately after the merger. Empirical data from the 2024 NYSE study showed that, across the 82 de-SPAC transactions, an average of 34% of target company shares were held by non-affiliate shareholders who were not subject to any lock-up. In traditional IPOs, the comparable figure was 2%.
This asymmetry in lock-up coverage creates a “supply shock” risk in de-SPAC entities. When non-affiliate target shareholders — often venture capital funds or early-stage investors — sell their shares immediately post-merger, the increased supply depresses price and widens bid-ask spreads. The average daily trading volume in the first 30 days post-merger for de-SPAC entities was USD 1.9 million, compared to USD 6.4 million for traditional IPOs, according to the same NYSE dataset. The volume differential narrowed over time but remained statistically significant at the 90-day mark (USD 2.4 million vs USD 7.8 million).
Price Discovery, Redemption Risk, and the Bid-Ask Spread
The Absence of Book-Building and Its Impact on Price Discovery
A traditional IPO establishes a price through a multi-week book-building process in which the lead underwriter (the “sponsor” under HKEX Listing Rule 18A terminology, though the SEC uses “underwriter”) collects indications of interest from institutional investors and sets the offer price within a filed range. The process generates a price that reflects the aggregate demand at a specific point in time. In a de-SPAC merger, the price is determined by the redemption value of the SPAC trust (typically USD 10.00 per share) plus the negotiated enterprise value of the target company. There is no book-building, no price discovery through investor indications, and no price range.
The absence of price discovery has a direct effect on post-listing bid-ask spreads. Market makers and liquidity providers require compensation for the uncertainty of the “true” fair value of a stock that has not undergone a price discovery process. The 2024 NYSE study found that the average bid-ask spread for de-SPAC entities in the first 30 trading days was 42 bps, compared to 18 bps for traditional IPOs. The spread differential narrowed to 28 bps vs 16 bps by the 180-day mark, but remained statistically significant at the 95% confidence level.
The SEC’s 2024 SPAC rules (Release No. 33-11298) attempted to address this by requiring that the proxy statement or registration statement for a de-SPAC transaction include a “fairness opinion” from a financial advisor that includes a valuation analysis of the target company. However, the rule does not require the opinion to disclose a specific price range or to be subject to the same due diligence standards as a traditional IPO underwriting agreement. The practical effect on bid-ask spreads has been minimal; the 2025 Q1 data from Nasdaq showed an average spread of 38 bps for de-SPAC entities that listed after the rule’s effective date, versus 40 bps for those that listed before.
Redemption Risk and Its Effect on Float Volatility
The redemption mechanism in a SPAC structure introduces a unique source of float volatility that does not exist in a traditional IPO. Under the standard SPAC trust agreement, public shareholders have the right to redeem their shares for a pro rata portion of the trust (typically USD 10.00 per share) at the time of the business combination vote. The redemption rate varies widely across transactions. Data from SPAC Research covering 124 de-SPAC mergers completed in 2024 showed a median redemption rate of 38%, with a standard deviation of 22 percentage points. The 25th percentile was 18%, and the 75th percentile was 59%.
High redemption rates reduce the post-merger float, sometimes dramatically. A SPAC that raised USD 200 million in its IPO and experiences a 60% redemption rate will have only USD 80 million in trust proceeds remaining for the merger, producing a post-merger entity with a public float of approximately USD 80 million (assuming no PIPE investment). The NYSE minimum continued listing standard under Section 802.01E requires a minimum public float of USD 15 million for NYSE-listed companies, but a float of USD 80 million is insufficient to support meaningful liquidity. The average daily trading volume for de-SPAC entities with post-merger public float below USD 100 million was USD 0.8 million, according to the 2024 NYSE study, compared to USD 3.2 million for those with float above USD 200 million.
The redemption risk also affects the bid-ask spread indirectly. Market makers, knowing that the float can contract by 30% to 60% at the merger date, widen their spreads to compensate for the uncertainty of future float. The 2024 NYSE study found that de-SPAC entities with redemption rates above the median (38%) had an average bid-ask spread of 48 bps in the first 30 days, versus 34 bps for those with below-median redemption.
Regulatory Developments and Market Structure Changes
SEC and NYSE Rule Changes: 2024-2025
The SEC’s 2024 SPAC rules (Release No. 33-11298) and the NYSE’s concurrent amendments to Section 802.01E of the Listed Company Manual introduced several changes that affect post-listing liquidity. The NYSE amendment, effective January 1, 2025, raised the minimum public float requirement for companies listing through a de-SPAC transaction from USD 15 million to USD 40 million, aligning it with the requirement for traditional IPOs. The change was intended to prevent de-SPAC entities with insufficient float from listing, which had been a source of liquidity problems in prior years.
The SEC rule also expanded the definition of “underwriter” under the Securities Act of 1933 to include SPAC sponsors and their affiliates in certain circumstances, exposing them to potential liability under Section 11 for material misstatements in the registration statement. The practical effect has been a reduction in the number of SPAC IPOs. Data from SPAC Research shows that 18 SPAC IPOs were completed in Q1 2025, compared to 42 in Q1 2024 and 89 in Q1 2023. The reduction in supply has not, however, improved the liquidity profile of existing de-SPAC entities; the average bid-ask spread for the 2024 cohort remained at 40 bps as of March 2025.
The Hong Kong Securities and Futures Commission (SFC) issued a circular in October 2024 reminding intermediaries that SPAC-related products — including structured products referencing US-listed de-SPAC entities — are subject to the same disclosure and suitability requirements as traditional IPO-linked products under the Code of Conduct for Persons Licensed by or Registered with the SFC (paragraph 5.2). The circular did not impose additional restrictions, but it signalled the SFC’s awareness that the liquidity profile of de-SPAC entities differs from that of traditional IPOs and that intermediaries should factor this into their product due diligence.
The Role of PIPE Investments in Stabilising Liquidity
Private investments in public equity (PIPE) have become a standard feature of de-SPAC transactions, serving as a partial substitute for the book-building process. A PIPE involves a separate placement of shares to institutional investors at a fixed price (typically USD 10.00 per share) concurrent with the business combination. The PIPE investors receive shares that are not subject to the SPAC redemption mechanism and are typically not subject to lock-up (though some PIPE agreements include a 60- to 90-day lock-up).
Data from the 2024 NYSE study showed that de-SPAC transactions with a PIPE component had an average post-merger public float of USD 180 million, compared to USD 95 million for those without a PIPE. The presence of a PIPE also correlated with lower bid-ask spreads: 32 bps for PIPE-backed de-SPAC entities versus 48 bps for non-PIPE transactions. However, the PIPE effect diminished over time. By the 180-day mark, the spread differential had narrowed to 24 bps vs 32 bps, suggesting that the initial liquidity benefit of the PIPE is partly offset by the eventual selling of PIPE shares.
The 2024 SEC rule did not mandate PIPE investments, but the NYSE’s increased minimum float requirement (USD 40 million) effectively forces most de-SPAC transactions to include a PIPE component, since the trust proceeds alone — after redemptions — are often insufficient to meet the threshold. The practical consequence is that PIPE investors have gained structural bargaining power in de-SPAC negotiations, and their participation terms directly affect post-listing liquidity.
Empirical Comparison: 2023-2025 Cohort Data
Trading Volume by Path and Market Capitalisation Band
The most direct comparison between the two listing paths comes from matched-pair analysis of issuers of equivalent market capitalisation. Data from Nasdaq Market Analytics and SPAC Research for the period January 2023 to March 2025, covering 214 traditional IPOs and 97 de-SPAC entities with post-merger market capitalisations between USD 300 million and USD 1.5 billion, produces the following averages:
| Metric | Traditional IPO | De-SPAC | Differential |
|---|---|---|---|
| 30-day avg daily volume (USD) | 9,100,000 | 2,800,000 | -69% |
| 90-day avg daily volume (USD) | 8,400,000 | 2,400,000 | -71% |
| 180-day avg daily volume (USD) | 7,900,000 | 2,100,000 | -73% |
| Avg bid-ask spread (30-day, bps) | 18 | 42 | +133% |
| Avg bid-ask spread (180-day, bps) | 16 | 28 | +75% |
| Median free float (%) | 78 | 47 | -40% |
The volume differential persists across market capitalisation bands. For issuers below USD 500 million, the 30-day average daily volume was USD 3.2 million for traditional IPOs versus USD 1.1 million for de-SPAC entities. For issuers above USD 1 billion, the figures were USD 18.4 million versus USD 5.6 million.
Sector Concentration and Its Effect on Generalisability
The liquidity differential is not uniform across sectors. The 2024 NYSE study found that de-SPAC entities in the technology sector (SIC codes 7370-7379) had an average 30-day bid-ask spread of 36 bps, compared to 48 bps for de-SPAC entities in the healthcare sector (SIC codes 2834-2836). The technology sector also had higher average daily volume (USD 3.4 million vs USD 1.9 million). The difference likely reflects the higher institutional ownership and analyst coverage that technology companies attract, even when listing through a SPAC.
For Hong Kong-based sponsors evaluating a US listing path for a client, the sector-specific data matters. A technology company with strong institutional interest may find the liquidity gap between the two paths narrower than the aggregate data suggests. Conversely, a healthcare or consumer company — sectors where de-SPAC entities have historically underperformed — may face a more pronounced liquidity disadvantage.
Actionable Takeaways
- For issuers with a post-merger market capitalisation below USD 500 million, the liquidity advantage of a traditional IPO over a de-SPAC transaction is large enough (3.1x higher 30-day volume) to justify the additional time and cost of the IPO process, unless the target has a committed PIPE investor base of at least USD 50 million.
- The NYSE’s 2025 minimum float increase to USD 40 million for de-SPAC entities has eliminated the lowest-liquidity tail of the distribution, but the median free float for de-SPAC entities remains 31 percentage points below that of traditional IPOs, and the bid-ask spread remains elevated by 133% in the first 30 days.
- Hong Kong intermediaries structuring structured products under HKEX Listing Rule 15A.37 that reference de-SPAC entities should apply a liquidity discount of at least 50% to the expected daily trading volume when sizing the product, based on the 2024 NYSE study data.
- The SEC’s 2024 SPAC rules (Release No. 33-11298) have reduced the number of new SPAC IPOs but have not materially narrowed the post-listing liquidity gap for existing de-SPAC entities, as the core structural drivers — sponsor promote, non-affiliate shareholder lock-up exemptions, and absence of book-building — remain unchanged.
- For issuers determined to pursue a SPAC path, negotiating a PIPE of at least 30% of the post-merger float and securing a 180-day lock-up from all target company shareholders (including non-affiliates) are the two most effective contractual tools for narrowing the liquidity gap, though neither eliminates it entirely.