SPACs Index: In-Depth Understanding of Acquisition Dynamics

The SPACs Index is a modern financial tool developed to track the performance of Special Purpose Acquisition Companies within global financial markets. These companies operate on the principle of raising capital through an initial public offering (IPO), without any actual operational activity, with the primary goal of acquiring or merging with an existing private company and transforming it into a listed entity. The SPACs Index provides a comprehensive view of the price movements of these companies' stocks, enabling investors and financial institutions to assess general sector trends and compare its performance with major market indices like the S&P 500 or Nasdaq. The importance of the index lies in its ability to summarize the dynamics of a rapidly growing and diverse sector, encompassing companies from technology, energy, healthcare, and financial services, offering a holistic picture of investors' risk appetite and willingness to support innovative projects. In the Saudi markets, the importance of studying the SPACs Index is highlighted in light of the shift towards adopting new investment tools that support the transition to a knowledge economy and diversify income sources, despite the index not being officially recognized for trading yet. Understanding the index is essential to keep pace with global developments, especially as SPACs have become an increasingly popular alternative channel for rapid listings on exchanges, away from the complex traditional IPOs. The index also provides a robust analytical base for measuring the performance of high-growth companies and assessing the risks associated with investing in this volatile sector. From this perspective, the SPACs Index represents an important tool not only for individual investors but also for investment funds and regulatory bodies monitoring capital trends and structural changes in the markets.

The roots of the Special Purpose Acquisition Companies (SPACs) concept date back to the 1970s and 1980s in the United States, but it did not gain widespread attention until the regulatory and technological transformations witnessed in the financial markets in recent years. The period from 2020 to 2021 saw an explosion in the number of companies adopting this model, capitalizing on the ease of raising capital in a low-interest-rate environment and the desire to achieve exceptional returns through investments in high-growth startups. In this context, developing the SPACs Index as an analytical tool has become essential for investors to monitor the movement of this sector, characterized by its high volatility and elevated risks. The index aggregates price performance data for a selection of SPACs listed in the markets and calculates performance averages, allowing for comparisons of sector results with the overall market or specific sectors like technology or healthcare. The index also provides the ability to track the sector's evolution over time, as periods of intense activity or decline can often be linked to economic and regulatory factors such as rising interest rates or tightening financial disclosure requirements. In the Saudi markets, the SPACs concept is viewed as a potential tool to support innovation and enable startups to access capital quickly, making monitoring the SPACs Index essential for anticipating financial and economic development prospects. The index plays a central role in highlighting the risks and opportunities associated with this investment model and is an indispensable tool for anyone seeking to understand the dynamics of modern markets and analyze capital trends in an ever-changing environment.

The SPACs Index is characterized by the diversity of sectors it includes, as it does not limit itself to one field but extends to encompass companies from various sectors such as technology, energy, healthcare, financial services, and even traditional industries. This diversity gives the index the ability to reflect the overall market dynamics, as risks and returns can vary significantly between companies based on the targeted sector. For instance, SPACs focusing on technology often face high volatility due to the nature of innovation and intense competition in this field, while renewable energy companies may present long-term growth opportunities supported by global government policies. Additionally, the index includes companies with varying market capitalizations, from small to large, allowing investors to assess the risks associated with company size and financial stability. In 2024, the index witnessed notable deals in the biotechnology and clean energy sectors, where investors pumped significant amounts into promising projects despite the caution that prevailed in the market after the substantial expansion in 2021. This sectoral variation creates opportunities for comparison between the performance of traditional sectors and emerging sectors within the same index, enhancing its importance as a comprehensive analytical tool. For the Saudi market, any future direction to activate SPACs or adopt a specific index will benefit from this diversity, as the index can be employed to monitor the performance of startups in areas aligned with Vision 2030, such as technology, sustainable energy, and healthcare. Thus, the SPACs Index serves as a mirror reflecting not only capital fluctuations but also structural transformations in the global and local economy.

Financial markets in 2024 and 2025 witnessed notable transformations in the performance of the SPACs Index on a global level. After the peak reached by the SPAC sector in 2021, where deal values exceeded tens of billions of dollars, the market entered a re-evaluation phase during 2022 and 2023 due to tightened regulatory frameworks and rising interest rates. Nevertheless, some vitality returned to the sector in 2024, particularly in the biotechnology and clean energy sectors, where merger deals worth billions of dollars were documented in the first half of the year. International reports noted a relative recovery in SPAC activity in the United States and Europe during the second quarter of 2024, with improved economic conditions and declining inflation rekindling investors' appetite for risk. Data indicates that the index regained some of its vitality compared to the previous recession period, with a greater focus on deal quality rather than quantity. In contrast, the market in the Middle East, including Saudi Arabia, closely monitored these developments, with increasing interest from Gulf investment funds in exploring future opportunities in this field. By mid-2025, no massive deals had been recorded in the region comparable to those in the West, but the general trend indicates that Gulf markets are prepared to adopt similar models when the appropriate regulatory environment is available. This reality reflects the cyclical nature of the SPAC market, which goes through periods of intense activity followed by periods of calm and restructuring. This change underscores the importance of the SPACs Index as a tool for monitoring market transformations and assessing the health of the global investment environment, with the need to keep track of regulatory and economic developments that play a crucial role in directing the index's movement.

Currently, the Saudi financial market (Tadawul) has not launched an official index specifically for SPACs, primarily due to the novelty of the concept in the region and the absence of major local issuances of this type until 2025. Nevertheless, the SPACs Index is gaining increasing attention from regulatory bodies and local investors, as part of the Kingdom's efforts to diversify investment tools and support startups. Strategic trends in Vision 2030 indicate the importance of developing a flexible investment environment that accommodates financial innovations, and adopting SPACs and a specific index for them could be part of this vision in the near future. The Saudi Capital Market Authority's recent actions have focused on improving disclosure requirements and facilitating listing procedures, paving the way for new companies to be listed through alternative mechanisms like SPACs. Practically, Saudi investors are monitoring global SPAC indices as a benchmark for innovation in capital markets, benefiting from international experiences in assessing risks and opportunities. If a SPAC index is adopted in Tadawul in the future, it is expected to include startups in technology, renewable energy, and healthcare sectors, supporting the state's direction towards a knowledge economy. This transformation will require developing advanced regulatory frameworks that ensure transparency and protect investors, focusing on deal quality rather than quantity, as seen in global markets following the 2021 boom. Overall, the SPACs Index represents a strategic opportunity for the Saudi market to expand listing options and achieve integration with global financial markets, while also preparing to face the regulatory and economic risks associated with this investment model.

The performance of the SPACs Index is influenced by a complex array of economic, regulatory, and behavioral factors that interact to determine its short- and long-term trends. Economically, interest rates play a crucial role; a low-interest environment facilitates financing for mergers and acquisitions, prompting investors to inject new capital into SPACs, while rising interest rates lead to reduced activity due to increased financing costs and diminished risk appetite. Additionally, liquidity levels in global markets directly affect companies' ability to raise funds quickly. On the other hand, regulatory frameworks play a pivotal role, as tightening disclosure and transparency requirements by regulatory bodies (such as the U.S. Securities and Exchange Commission) limits the rush of companies to establish random SPACs and enhances the quality of deals listed in the index. In 2024, markets witnessed regulatory adjustments aimed at stabilizing the market and protecting investors, resulting in a slight decline in the number of new issuances and increased focus on companies with clear plans and qualified boards. Furthermore, behavioral factors such as investor confidence and general market sentiment significantly impact the index's performance; major successes in merger deals boost market morale, while failures or weak performance post-listing lead to declining confidence and ongoing volatility. Finally, the targeted sectors play an important role, as a focus on growth sectors (such as technology and clean energy) drives the index upward with rising return expectations, while exposure to traditional or higher-risk sectors increases volatility. Thus, it is clear that the SPACs Index is subject to intertwined influences that require careful monitoring and a deep understanding of economic, regulatory, and behavioral factors.

Comparing the SPACs Index with traditional market indices such as the S&P 500 and Nasdaq is essential for understanding the nature of risks and opportunities each index presents to investors. The S&P 500 includes the largest 500 American companies in terms of market capitalization and financial stability, such as Apple, Microsoft, and Amazon, known for its relative stability and sustainable long-term returns. In contrast, the SPACs Index comprises special purpose acquisition companies, which are typically established without real operational activity and aim to merge or acquire high-growth startups. This fundamental difference in the nature of the companies makes the SPACs Index more susceptible to sharp fluctuations, as some companies listed in it can achieve exceptional returns if their merger deals succeed, while unsuccessful deals may lead to significant losses for investors. Moreover, the SPACs Index reflects the market's appetite for risk and innovation, while the S&P 500 represents a safer option for investors seeking stability and gradual returns. Nasdaq, on the other hand, focuses on technology and innovation companies, making it relatively closer in terms of high growth nature, but it includes companies with established operational histories rather than companies founded solely for the purpose of merging. In recent years, data has shown that the SPACs Index can outperform traditional indices during boom periods, but conversely, it tends to decline sharply during recessions or when major deals fail. Hence, the importance of the index as a tool for measuring high risks and potential returns is highlighted, with the necessity for investors to incorporate this variance into their investment strategies without relying solely on the index for decision-making.

The SPACs Index represents one of the financial innovations that combine high growth opportunities with elevated risks, making it a focal point of interest for investors and financial institutions. Among the most notable advantages the index offers is its ability to enable investors to access a diverse range of startups before their full integration into the market, providing the potential for rapid and substantial profits if merger deals succeed. The index also allows for geographic and sectoral diversification, as it includes companies from multiple fields, reducing the risks associated with focusing on a single company or sector. Furthermore, the index provides a framework for measuring merger activity in the economy and reflects the market's appetite for risk during certain periods. On the other hand, the most significant downsides lie in the high level of risks and sharp volatility, as the failure of a merger deal or the failure to achieve expected growth for the targeted company leads to a sharp drop in stock prices, directly impacting the index as a whole. Additionally, SPACs are subject to legal deadlines to find suitable deals, and their failure to do so may result in returning capital to investors without any gains. Furthermore, a lack of transparency in some cases, especially in new or inexperienced companies, increases the likelihood of losses. Moreover, general economic variables such as interest rates and declining economic activity directly affect the index, reducing the attractiveness of this type of investment. Overall, the SPACs Index is a tool that combines high growth opportunities with relative uncertainty in performance, requiring investors to conduct thorough research and have a deep understanding of the influencing factors before engaging in this type of index.

The year 2024 witnessed several prominent deals that directly impacted the movement of the global SPACs Index, especially in the biotechnology and renewable energy sectors. Among the most notable examples was the merger of one of the largest American SPACs with a startup in the electric vehicle sector, where the deal exceeded two billion dollars, leading to a significant rise in the index during the second quarter of the year. Additionally, European markets saw a massive deal in the biotechnology sector, where a SPAC listed on the London Stock Exchange acquired a company specializing in developing gene therapies for nearly 1.5 billion dollars, positively reflecting on the performance of the corresponding European index. These deals were not exceptions but part of a general trend towards focusing on deal quality and the robustness of the operational plans of targeted companies, after global regulatory bodies lowered expectations and imposed stricter disclosure requirements. Conversely, some deals faced setbacks that temporarily led to a decline in the index, particularly in cases where targeted companies failed to achieve the expected profits post-listing. These examples demonstrate that the performance of the SPACs Index is directly influenced by the success or failure of major deals, and investors have become more selective in evaluating available opportunities. Additionally, the distribution of deals between traditional and new growth sectors highlights the index's role in reflecting global capital transformations and its trends towards innovation and sustainability.

One of the most important roles played by the SPACs Index is enabling financial markets and investors to evaluate the performance of high-growth companies that are often in their early stages of operational development. SPACs provide an alternative channel for quickly listing these companies on exchanges, away from the time-consuming and regulatory complexities of traditional IPOs. The index can reveal the success of this investment model in delivering substantial returns to investors, as well as reflecting the markets' ability to absorb innovations and develop new sectors. The index allows investors to compare the performance of high-growth companies within the SPACs sector with that of traditional sectors, aiding in understanding the nature of risks associated with rapid innovation and operational instability. For example, in cases of successful biotechnology or renewable energy companies post-listing, the index often records unprecedented rises reflecting investor confidence in the sector's potential. Conversely, the setbacks of some companies highlight the importance of studying operational and managerial fundamentals before merging, as weak performance post-listing leads to a decline in the index and affects market sentiment. The SPACs Index also plays a role in encouraging startups to improve governance and financial disclosure standards, as the ability to attract investors increasingly depends on transparency and the quality of strategic plans. From this perspective, the index is a central tool in evaluating the dynamics of rapid growth in modern financial markets.

Although the SPACs Index primarily focuses on special purpose acquisition companies and high-growth companies, studying its relationship with traditional sectors such as cement is essential for understanding the fundamental differences in market dynamics. Hail Cement Company (symbol 3001), for example, was listed in the Saudi financial market within the basic materials sector, characterized by relatively stable growth and a clear customer base in construction projects. In 2024, the company faced a significant decision from Tadawul to delist the stock permanently after a suspension period, ending the possibility of trading the stock in the market. This case indicates that traditional sector companies, despite their importance to the national economy, typically do not fall within the components of the SPACs Index, which focuses on high-growth and high-risk companies. Additionally, the performance of cement companies is usually measured by sectoral indices such as the basic materials index or the construction and building index, rather than SPACs indices. Nevertheless, analyzing the case of Hail Cement provides a deeper understanding of how investor evaluations differ between stable companies with expected profits and startups with unpredictable growth. It also highlights the importance of continuous monitoring of financial disclosure quality and adherence to regulatory standards, as any shortcomings may lead to suspension or delisting of the stock, as happened with Hail Cement. Overall, the company's case underscores the fundamental differences between investing in mature and stable sectors versus investing in high-risk innovative sectors like those tracked by the SPACs Index.

The cement sector is a vital sector in the Saudi economy, meeting the needs of mega infrastructure projects that fall under Vision 2030, such as NEOM, Qiddiya, and the Red Sea projects. The sector includes several major companies such as Yamama Cement, Qassim Cement, National Cement Company, and Southern Cement, along with medium and small companies like Hail Cement before its delisting. The sector is characterized by moderate competition, as production sometimes exceeds local demand, leading to price stability or decline. Companies face numerous challenges such as rising energy costs, fluctuations in raw material prices, and the impact of government spending on construction projects. Conversely, major national projects provide opportunities for future growth, especially with the trend towards adopting more environmentally efficient production technologies. From an investment perspective, cement companies are generally less volatile than high-growth companies and often provide regular cash distributions, although profit margins may shrink during recessions or market saturation. Compared to the SPACs Index, the cement sector remains an example of mature sectors focused on sustainability and stable profits rather than rapid growth and high risks. This analysis highlights the importance of specialized sectoral indices that help investors assess the performance of traditional sectors alongside innovation indices like SPACs, enriching the investment decision-making process and enhancing portfolio diversification.

The Saudi financial market (Tadawul) has witnessed a series of regulatory and procedural developments in recent years that have directly impacted sectoral indices and the performance of listed companies. Among the most notable developments was the decision to delist Hail Cement Company (3001) in June 2024, following a previous decision to suspend trading due to specific company or regulatory circumstances, underscoring the seriousness of regulatory bodies in maintaining disclosure standards and protecting investors. The same period also saw an announcement to suspend trading of the Learning Academy stock in August 2025 at the company's request, reflecting Tadawul and the Capital Market Authority's commitment to regularly monitor company activities and ensure compliance with standards. Simultaneously, regulatory bodies monitored developments in global SPAC indices, especially as Western markets moved towards tightening entry and disclosure requirements for companies listed in the SPACs Index. These policies are expected to continue influencing the methodology for calculating sectoral indices in Saudi Arabia, with a focus on deal quality and financial disclosure transparency. In light of these developments, investors must keep track of regulatory updates and their impact on sectoral indices, as any changes in the disclosure environment or listing criteria may lead to restructuring of indices and changes in the weight of constituent companies. Additionally, monitoring global indices like SPACs allows Saudi investors to understand international trends and prepare for any future changes in the local market, especially regarding the adoption of new investment tools or the development of specialized qualitative indices.

The experience of the global SPACs boom during the period 2020-2021 and the subsequent corrections in 2022-2023 offers important lessons for the Saudi investment environment. The first lesson lies in the importance of regulatory hedging, as the experience showed that the absence of strict disclosure standards can lead to an inflation of companies with unsustainable operational models, threatening market stability in the long term. The global experience also confirmed the necessity of focusing on deal quality rather than quantity, as success in merger deals heavily depends on management expertise and clarity of operational plans. Additionally, monitoring the performance of the SPACs Index demonstrated that markets go through cycles of intense activity followed by periods of re-evaluation and risk reduction. For the Saudi market, these lessons can be utilized in developing advanced regulatory frameworks that allow for the gradual and organized adoption of SPACs, with a focus on protecting investors and enhancing transparency. The local market can also benefit from the index as a benchmark for assessing the readiness of the investment environment to absorb new financial instruments, especially in light of the national shift towards diversifying income sources and supporting innovation. Overall, the global SPACs experience highlights the importance of balancing encouragement for innovation with risk hedging, which is a crucial element in developing strong and sustainable capital markets in the Kingdom.

Monitoring the SPACs Index is a fundamental step for any investor or financial analyst seeking to understand the dynamics of the special purpose acquisition companies market and assess capital trends in emerging sectors. The index can be monitored through global financial market platforms, specialized websites analyzing stock indices, and reports from research institutions tracking the performance of SPACs. These sources provide real-time or periodic data on the performance of the companies listed in the index, helping to identify periods of activity or stagnation and assess the success of major deals. The index can also be used to compare the performance of the SPACs sector with traditional or sectoral indices, enriching the financial analysis process and helping to build balanced investment strategies regarding risks and returns. However, it should be emphasized that the index does not represent an investment recommendation but rather an analytical tool that allows for understanding the general market context. Investors are always advised to analyze the economic and regulatory factors affecting the index, such as changes in interest rates or adjustments in regulatory frameworks, before making any financial decisions. Additionally, monitoring the index helps to track shifts in investors' risk appetite, which serves as an early indicator of potential changes in the investment environment. Finally, it is always recommended to consult a licensed financial advisor to understand how to incorporate the index into personal investment strategies, especially in light of the high volatility characterizing the SPACs sector.

The SPACs Index is expected to witness notable developments in the coming years, both globally and in the Saudi financial market. Globally, the index is moving towards a more mature phase after correcting the boom periods, with increased focus on deal quality and enhancing regulatory transparency. Regulatory bodies are expected to continue developing legislative frameworks that protect investors and prevent the recurrence of excessive risk-taking observed in the market in 2021. In Saudi Arabia, the index represents a strategic opportunity to support startups and enable them to access capital quickly, especially in sectors aligned with Vision 2030, such as technology, renewable energy, and healthcare. However, the index faces challenges related to the need for developing advanced disclosure standards, building investor confidence in the SPACs model, and training local talent to manage complex deals. Additionally, the local economic environment, including interest rate policies and liquidity levels, will directly impact the market's ability to absorb this type of company. Overall, the future of the SPACs Index holds many opportunities to enhance innovation and diversify investment tools, but it also requires regulatory vigilance and collaboration between government and private sectors to ensure sustainable growth and protect the rights of all parties. Hence, the importance of monitoring the index and understanding its developments within a comprehensive investment strategy that considers local and global market variables.