Discerning value from fairy tales: the case of SPAC mispricing

This study analyzes the phenomenon of Special Purpose Acquisition Companies (SPACs), with particular reference to the American context and their performance following the business combination. The work moves from the central problem of systemic overvaluation of SPACs at the time of listing, linked largely to intangible factors, and questions the market's ability to discern between “fairy tales” and real value. After a review of the international literature, which highlights critical issues in terms of conflicts of interest, distorted incentives and post-merger underperformance, the research focuses on an empirical analysis conducted on a sample of SPACs listed and merged in the reference period, using data extracted from LSEG Workspace, Statista, and Factset. The methodological approach combines three levels of investigation: (i) analysis of cumulative average abnormal returns (CAAR) to evaluate the short-run reaction at the time of the announcement, (ii) calculation of buy-and-hold returns (BHAR) to estimate medium to long-term performance, and (iii) econometric regressions relating pre-merger variables (structural, financial and qualitative) to post-merger outcomes. In accordance with the academic literature, the results show that SPACs tend to generate positive short-term returns, while they suffer a progressive deterioration in performance in the medium to long term. There are some pre-merger indicators which appear to be determinants of the success or failure of the merger, such as IPO proceedings, Number of days between IPO and Acquisition, and Deal Value, while other more firm-specific variables that are less predictive, maintaining explanatory value within the model. The research strengthens the academic and professional debate by providing empirical evidence on the link between the intangible nature of the initial evaluation and subsequent underperformance, underlining how the correct identification of ex-ante determinants can reduce information asymmetry and support more efficient decisions for both institutional investors and regulators.