I think it better to ask, "what is the value-add of a SPAC over traditional IPO?" Because there's an existing channel to take a company public, why all this hinky backdoor runaround? To summarize what sibling comments illustrate, lots of bars get lowered (due diligence, et. al.) for a SPAC.
As an individual investor, ask yourself, "why would such a solid company need lower barriers to going public?" And after you answer that question for yourself, you stay the hell away from such things. Because those things are not meant to enrich you.
A combination of lower due diligence requirements and high (effective) fees meant that companies that could go a more traditional IPO path usually preferred that path. The leftovers were mostly the duds.
It was an initially very profitable but thin market, so returns went hard negative very fast once the market was cleared.
So the usual behavior, the first entrants make a ton of money, then the rest of wall street piles in behind them, although the market of "good deals" emptied out really quickly so returns rapidly went from very positive to very negative.
Its literally an inflation situation although instead of too much consumer money chasing too few consumer goods, its too much capital chasing too few good deals.
From my POV, it was basically a way to invest in early stage companies. Much like one could as an accredited investor via an early stage fund. It was extremely high risk, with a very long investment horizon.
The problem seemed to be that this was not widely what people took away from SPACs. Also, all the insider stuff was very scammy. I still think it was a good thing that fell into "we can't have nice things" because of all the assholes.
This was one of the promises of SPACs. The idea was that large companies were IPO'ing too late (ahem... Stripe) and that there was no way for the general public to take part in the same kind of upside they could with previous IPOs like Google and Facebook.
But there really wasn't any reason why a successful, high-upside, company would choose to stay private but decide to go public because of SPACs. So you ended up with what seems to be 2 tracks of companies going SPAC: 1) companies that were not really high-upside and mostly had poor business models looking for exit liquidity during the retail boom -- Metromile, Opendoor, etc. and 2) high-risk, early-stage capital intensive companies that probably weren't going to do as well in private fundraising -- all the EV companies, health care companies, etc.
The fact that the insiders made out on all these deals further support the charge that these things were largely a grift on retail investors during a vulnerable time for retail investors.
There is still a lot of time for the dust to settle on these and see what the long-term batting average for these things are. I'd be interested to see how SPAC returns compare to returns on Series A, B, C, D rounds of the same vintage to see if this actually did bring comparable opportunity to the public or not. A lot of those rounds done in 2020-2022 are probably deeper underwater as well.
