SPACs are making a comeback. After a decline in volume, Special Purpose Acquisition Company (SPAC) activity is experiencing a resurgence. If you’re planning to take your company public in the near future, this may have you wondering – should you use a traditional IPO or a SPAC? Both paths have advantages as well as risks.
The Rise, Fall and Return of SPACs
SPAC activity boomed in 2021. During the COVID-19 pandemic and the market volatility that ensued, many investors viewed SPACs as a fast and efficient way to take a company public. More than 59% of all new IPO listings in 2021 were SPACs, according to Nasdaq.
The boom didn’t last long. According to S&P Global, 610 SPAC IPOs raised a total of $160.75 billion in 2021. In 2022, there were only 86 SPAC IPOs, raising a total of $13.42 billion. The sharp decline in SPAC volume coincided with rising interest rates and increased regulatory scrutiny.
Now we’re seeing a SPAC resurgence. According to Forbes, around 116 SPAC IPOs were priced in the U.S. in the first half of 2026, raising $22.7 billion. In all of 2025, there were 144 SPACs that raised a total of $30.4 billion. These figures, combined with growing buzz, suggest that another SPAC boom could be forming.
The Appeal of SPACs in 2026
SpaceX went public with the biggest IPO in history, according to Reuters. Anthropic and OpenAI are also expected to go public with massive IPOs.
All of these mega IPOs could be a problem for companies hoping for more modest IPOs. Reuters explains that it may be harder for smaller issuers to attract attention, and as a result, some companies are turning to SPACs.
The AI and data center boom is also fueling SPAC interest. According to Insurance Journal, some tech startups are eyeing SPACs as a way to go public.
SPAC vs. Traditional IPO: The Pros and Cons
In a traditional IPO, a private company goes public by selling newly issued shares.
In a SPAC, a blank check company goes public as a shell company, raising capital to purchase a (not yet identified) private company. The shell company and the private company later complete a de-SPAC merger.
There are pros and cons to both options. Although market conditions may influence trends, company leaders need to consider their specific situation when deciding which path to take.
According to the SEC, companies that use a traditional IPO have more control over their initial investor base. They can also benefit from the assistance of an underwriter in marketing and managing the initial trading volume. However, the process can be time-consuming.
By using a SPAC to go public, companies can speed up the process while also benefiting from more certainty regarding the amount of capital raised and access to guidance and expertise from the SPAC sponsors. However, equity dilution is a risk. The SEC says that this is why SPACs tend to focus on larger companies.
Faster Doesn’t Always Mean Better
Going public is a journey. While a shortcut may seem appealing to company leaders who are eager to seize opportunity and take their companies to new heights, it is not always the best route.
As KPMG warns, the compressed timeline of a SPAC can be an issue. The target company typically has to do most of the work to prepare the required SEC filings, establish internal controls, and assume other responsibilities associated with a public company, and there is less time to complete these preparations.
Likewise, companies may like the idea of bypassing the underwriting required as part of a traditional IPO process. However, KPMG points out that the underwriter makes sure the company is meeting all regulatory requirements. When this step is skipped, the company is left without the reassurances that a rigorous underwriting process can provide.
The 2021 SPAC boom resulted in a surge in SPAC-related securities litigation. According to Cornerstone Research, there were 33 core federal filings related to SPACs in 2021, beating out every other category including cryptocurrency.
Going Public Always Involves Risk
No matter what route you take, going public will also involve heightened risks.
In a traditional IPO, shareholder lawsuits can occur when a company fails to perform as expected, triggering increased scrutiny of the leaders’ actions and statements before, during and after the IPO.
In a SPAC transaction, in addition to these risks, the SPAC’s process for selecting a target company can also come under scrutiny. If litigation occurs, the merger can complicate D&O coverage. If insurance is not structured appropriately, coverage gaps can occur, leaving the directors and officers exposed to litigation without sufficient insurance protection.
Regardless of whether you use a SPAC or traditional IPO, if you’re thinking about taking your company public, it’s important to conduct a thorough risk assessment and start thinking about D&O coverage sooner rather than later. NSI Insurance Group can help you assess your risks, identify coverage gaps and build a D&O program that supports your transition to a public company. Contact the Capital Market Group at NSI for D&O coverage guidance.
