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Last year was a blockbuster year for the public markets and saw a record number of special purpose acquisition companies go public. All told, 613 SPACs raised more than $162 billion in gross proceeds, crushing the record set in 2020, which was already a standout year for the SPAC market.聽

But many of those deals fared poorly. The vast majority of companies that went public through a SPAC traded far below their highs by the end of the year, as we鈥檝e reported. And despite a fourth-quarter flurry of SPAC activity, it鈥檚 unclear if 2022 will shape up to be as active for the SPAC market鈥攇iven the current market conditions with the prospect of rising inflation and regulatory crackdowns looming.

The first half of the year is likely to be bumpy for SPACs, according to , founder of , noting that it will 鈥減robably get worse before it gets better.鈥澛�

She added that the SPAC market does tend to be cyclical and change quickly, so it could turn around fast.

Additionally, quality SPAC teams likely won鈥檛 price an IPO with such uncertain market conditions.

鈥淚t鈥檚 hard to come up with one overarching thing to say,鈥� Marvin said. 鈥淚f you look at all 579 SPACs out searching right now, they鈥檙e not all created equal. They鈥檙e not all going to have the same outcome.鈥澛�

The 鈥渃ream of the crop鈥� will rise and there will be some very good deals, but it will be tougher for first-time SPAC sponsors because of the complexity of the process and the macroeconomic environment, which makes going public through a SPAC less appealing for many companies, according to Marvin.聽

If the Federal Reserve raises interest rates or SPACs face more regulations, public SPACs could be hammered鈥攎aking companies less inclined to go public.

SPAC proceeds reached a record $82.8 billion in the first quarter of 2021, before falling to $11.9 billion in the second quarter once SPACs faced regulatory scrutiny, . The fourth quarter saw a bit of a rebound with SPAC proceeds reaching聽 around $33 billion, according to Will Braeutigam, the national SPAC execution services leader at .

Searching for a target company is a competitive sport, according to Marvin. A SPAC鈥檚 structure and team experience is crucial.

鈥淵ou鈥檙e going to have a lot of disasters, but you鈥檙e also going to have a lot of good wins,鈥� Marvin said. 鈥淭here will still be good companies that go public through SPACs. The problem is鈥攁nd my worry is鈥攖he car wreck gets the most amount of eyeballs.鈥�

With fewer SPAC sponsors coming in, there likely won鈥檛 be as many SPACs that form or go public this year, according to Doug Jacob, co-founder of &vest, a consumer brand investment and incubation platform.聽

But 鈥渜uality SPAC sponsors,鈥� as Jacob put it, will continue to get deals done and file SPACs.

SPAC merger announcements will likely eclipse 2021鈥檚 stats, according to Braeutigam. That鈥檚 because of the record number of SPACs that went public last year. Many of those SPACs, especially those in the fourth quarter, had shorter cycles, so they鈥檙e facing a time crunch.聽

The supply side of the SPAC market is the highest it鈥檚 ever been at nearly 580, Braeutigam said. And of those deals, around 230 will have to de-SPAC this year鈥搇ikely a record.

Of course, not all of those SPACs will find target companies and some will have to liquidate. Still, Marvin believes there will be few SPAC liquidations this year.聽

What鈥檚 more likely is that those 鈥渮ombie SPACs鈥� keep searching in some form or another.聽

When a SPAC reaches the end of its life, there鈥檚 generally an option for it to extend its timeline if shareholders vote to do so. Otherwise, the SPAC liquidates and shareholders receive their money back, while the founder essentially forfeits their shares.

Some of the worst-performing VC-backed companies that went public through a SPAC last year include (closed at $4.62 on Tuesday after a one-year high of $14.77), (closed at $3.31 on Tuesday after a one-year high of $28.85) and (closed at $1.70 Tuesday after a one-year high of $12.45).聽

Part of the reason many SPACs were hammered is because valuations were so high, according to Jacob.

鈥淚 think the first half of this year in general, beyond just the SPAC market, is going to be volatile,鈥� Jacob said. 鈥淭here鈥檚 still some uncertainty around interest rates and COVID. And I think coming into the middle of the back half of the year you鈥檙e going to see strong numbers again for IPOs and sentiment in the market.鈥�

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