After a few quiet years, special purpose acquisition companies (SPACs) have made a comeback, and the Cayman Islands is once again playing a central role.
The market dynamics of 2024 and 2025 have created fertile ground for new SPAC IPOs, but this time around, sponsors and directors are drawing on lessons from the previous cycle to shape a more thoughtful, resilient approach.
More than 95% of the SPACs launched in 2025 are domiciled in the Cayman Islands.
Key drivers of the revival
The renewed popularity is not a simple repeat of 2021, and the factors behind the renewed interest in SPACs are more varied.
Firstly, private market valuations have reset, and many attractive targets are now looking for a route to public markets that offers certainty, something a well-structured de-SPAC may be able to deliver more reliably than a traditional IPO in today’s climate.
Secondly, sophisticated sponsors, often with a track record of successful SPACs, have returned with investor-friendly terms, rebuilding market confidence.
Finally, the Cayman Islands’ robust, predictable, and flexible corporate legal framework remains a key draw for complex, cross-border transactions.
A survey of SPAC professionals conducted at The SPAC Conference in June 2025 supports these observations: 84% of respondents rated the SPAC market as “somewhat healthy”, 95% expected moderate to significant growth in SPAC IPOs over the next 12 months, and 61% anticipated better outcomes from de-SPAC deals compared to last year.
While challenges persist, SPACs targeting the technology, health/life sciences, AI/robotics, energy, and fintech sectors are increasingly attractive to investors.
Litigation concerns: Did the threat materialise?
A primary concern from the last boom was the potential for widespread litigation against SPAC sponsor directors for alleged breaches of fiduciary duty, particularly concerning the de-SPAC process.
While this risk led to tighter governance and more scrutiny, the volume of litigation that some had anticipated never quite materialised. Strong processes, independent board oversight, and clear disclosures are still the best defence.
In addition, sponsors have increasingly recognised that the jurisdiction in which their SPAC is domiciled correlates with the level of litigation risk. In this regard, it is worth noting that shareholder litigation is less prevalent in the Cayman Islands than in the US, and directors of Cayman Islands companies are generally less exposed to actions for breach of fiduciary duty.
The SPAC is back, but it has evolved. Sponsors embarking on this journey must prioritise strong corporate governance from inception and getting the legal foundations right.
Kevin Ho is a partner and member of Walkers’ Corporate & Investment Funds Group based in Hong Kong.
