The phase immediately preceding the frenzy seems to have proved a poor bet for investors. In October 2020 Michael Klausner and Emily Ruan of Stanford and Michael Ohlrogge of New York University published a draft paper evaluating investors’ returns. For spacs that merged between January 2019 and June 2020, these were dismal. The problems were structural. Investors who buy a spac’s shares during its ipo are often given free “warrants”, the right to buy more stock in the future. Around 5.5% of investors’ money is eaten up in underwriting fees. Punters can claim their stake back at any time, but that leaves the costs to be borne by the rest. And when a deal is struck, the sponsor typically takes 20% of the shares issued. From every $10 raised, a median of only $5.70 was available for the merged entity to spend.

—

Crucially, there is little evidence of lasting change. “It’s remarkable how little innovation in structure there’s been,” says Mr Klausner. Sponsor shares, warrants and underwriting fees are still present in much the same form. Redemptions and warrants offered are on the up again, and institutional investment has begun to fall. The havoc of 2021 has not wiped away all of spacs’ ills. If anything, it has left a lot of muck behind.