Misconduct in the SPAC market: Evidence from venture capital exits

Alexander Peter Groh, Juliane Proelss, Aurélie Sannajust and Denis Schweizer

Journal of Corporate Finance, 2025, vol. 93, issue C

Abstract: This paper investigates the performance of venture capital-backed (VC-backed) firms upon their exits through mergers with special purpose acquisition companies (SPACs) or “more traditional” initial public offerings (IPOs) during the recent SPAC wave. Compared to their IPO peers, VC-backed ventures merging with SPACs tend to exhibit smaller size, less current and analyst-projected future profitability, and additional characteristics that indicate lower venture quality. Notably, SPACs merging with VC-backed ventures demonstrate significant underperformance relative to both SPACs merging with non-VC-backed companies and “standard” IPOs. This suggests that VCs may have exploited a relative lack of regulation and investor naivety. They may have presented their lower-quality ventures as appealing opportunities for mergers with SPACs, which resulted in their substantial underperformance.

Keywords: Exit; IPO; Market misconduct; SPAC; Venture capital (search for similar items in EconPapers)
JEL-codes: D81 G24 G32 L26 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:93:y:2025:i:c:s0929119925000604

DOI: 10.1016/j.jcorpfin.2025.102792

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