New SPAC Boom(let) Is the Same as the Last SPAC Boom
Why wait for the mega AI initial public offerings expected later this year when you can invest in a nuclear fusion company or a MAGA crypto bank? These companies and other not-ready-for-IPO names are coming to the markets via special purpose acquisition companies.
After SPACs vaporized billions of dollars during the boom-and-bust cycle early this decade, speculators are again using them to peddle risky startups in hot industries. The current upturn is nowhere close in numbers to the last boom, but it is one more piece of evidence that speculation is solidly entrenched in the markets.
In the past few weeks, that speculation has appeared to rise, at least among SPACs. General Fusion, one of the small number of companies aiming to produce energy the same way the sun does, said it would merge with a SPAC. While the company says it has a 20-year track record of advancing fusion, it is nowhere close to producing power.
The deal would make General Fusion the first publicly traded company in its industry. There’s a good reason why there aren’t others. While the technology could in theory produce almost limitless clean power, real success is likely a decade away.
That time horizon is important. After the SPAC boom turned to bust in 2022, the Securities and Exchange Commission tried to tame its excesses. The biggest change was to tighten rules regarding what companies could say about their growth prospects. That was always the biggest difference between SPACs and IPOs, which strictly limit what details companies can share about their future expectations.
The new rules hardly matter to speculative companies such as General Fusion. Success is so far into the future that it would be hard to go after companies that don’t achieve what they promised. Imagine a regulator in 2035 saying General Fusion had violated SEC rules because it hadn’t yet achieved commercial-scale fusion.
That is not to say General Fusion is doing anything wrong. It is following the tried-and-true strategy of companies that are too speculative for IPOs, so they use SPACs to tap enthusiastic individual investors.
General Fusion CEO Greg Twinney said the company is doing the deal to raise cash to fund its development, and it wants to give small investors the chance to invest in its technology. “The people who will benefit from fusion in the long term can participate in this massive opportunity,” he said.
For those who have wiped the memory of the last SPAC boom from their minds, here’s how SPACs work. Investment firms raise money to create a SPAC, which is a company with no operating business. They then take it public, with the goal of buying a company that does have a real business, allowing it to go public through the deal.
Investors are betting that the investment firm behind the SPAC will find a good acquisition, though in the past, most deals have turned out disastrously. The people behind the SPAC and some other investors typically profit no matter what happens, and the small investors who buy the stock typically lose.
Last year saw $30 billion in SPAC IPOs, according to SPAC Research. That makes it the third biggest year in a decade, though it trails far behind the boom years of 2020 and 2021 when there was a combined $245 billion in IPOs. It’s early in the year, of course, but 2026 is on pace to top last year.
The AI boom and its staggering demand for energy is one reason why General Fusion can go public. Companies in the crypto industry and speculative tech companies in areas such as quantum computing are among those seizing the moment. “They are a great way for companies in hot and thematic sectors to come to market quickly,” said Benjamin Kwasnick, the founder of SPAC Research.
Among the crypto companies on the SPAC runway is Old Glory Bank, which describes itself as “the pro-America bank patriots can trust.” Old Glory, co-founded by President Donald Trump’s former secretary of housing and urban development, Ben Carson, has had dealings with the Trump family businesses.
Old Glory has already raised capital by selling shares in itself to small investors and allowing them to pay in crypto, including with a meme coin created by Trump. A company that later merged with a Trump family crypto business provided the technology to support those transactions.
For anyone looking for signs of froth in the markets, look no further than SPACs.
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