During the peak of the pandemic in 2020 and 2021, the US stock market saw a massive uptick in special purpose acquisition companies (SPACs). Low interest rates and stimulus payments created the liquidity needed for investors to take speculative positions on the economic recovery from COVID-19.
SPACs are shell companies formed by sponsors that list on public markets and then use the cash they’ve raised to merge with or buy target companies. Investors essentially buy into a shell company with a management team armed with a plan and a chequebook. But the IPO proceeds often sit in a trust while investors have redemption rights.
“There are a substantial number of venture capital and private equity backed companies where existing shareholders are seeking liquidity, while the companies themselves are looking to raise new capital,” said Walkers partner Andrew Barker. “SPACs can offer an attractive solution to both of those requirements.”
The 613 SPAC listings in 2021 raised US$162.50 billion, but by 2023 the demand had cooled and there were only 31 SPAC IPOs, which raised only US$3.85 billion.
But now SPACs are booming again. According to SPAC Analytics, 2025 saw 144 SPAC IPOs that raised a total of US$30.39 billion. And 2026 looks set to beat that, with the first six months of the year already seeing US$21.79 billion raised through 112 SPAC listings.
But the difference with this boom is that now more sponsors are using the Cayman Islands as the jurisdiction for the shell company that gets listed.
Cayman emerges as a SPAC favourite
According to Cayman Finance, 103 Cayman Islands-domiciled SPACs had listed in US markets as of 17 June 2026.
One reason this is happening is tax. The Inflation Reduction Act passed by the US in 2022 “introduced a 1% excise tax on certain share buybacks, complicating the redemption mechanics central to SPAC structures”, read a Cayman Finance press release.
Another reason is legal. “Litigation risk in some US states, combined with rising directors’ and officers’ insurance costs, has prompted sponsors and their advisers to look offshore,” read the press release.
Those reasons explain why SPACs look offshore, said Barker, but there are Cayman-specific factors that explain why the jurisdiction wins the business ahead of other international financial centres.
“I think the fact that Cayman is a well-established jurisdiction for both funds and existing entities that are listed in the US means that a lot of the institutional investors that might participate in a SPAC are already comfortable with Cayman,” said Barker. “Also now that we have more than 90% of the SPAC business then it becomes self-sustaining as we are the obvious choice for any new SPACs.”
Indeed, Cayman Finance figures show that Cayman-domiciled companies account for 94% of the 109 SPAC listings completed when it conducted its analysis in early June. “Cayman has long been the jurisdiction of choice for complex cross-border transactions, and sponsors are now applying that same logic to SPACs,” said Samantha Widmer, director and head of funds and capital markets at Cayman Finance.
“The combination of tax neutrality, a robust legal framework and deep capital markets infrastructure means Cayman is well positioned to support the revival of the SPAC market.”
SPACs, which are generally seen as more risky investments, have a poor record of rewarding investors and have significantly underperformed the broader stock market. But while SPACs often perform badly, the recent shift to Cayman brings more growth to the jurisdiction’s financial centre.
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