Defense and Space Tech Firms Increasingly Opt for SPAC Mergers Amid Investor Boom

A growing number of early-stage defense and space technology companies are choosing to go public by merging with special purpose acquisition companies (SPACs), leveraging a faster and more flexible route to capital amid heightened investor appetite for the sector.

A Surge in SPAC Deals

So far this year, six defense and space-related firms have announced SPAC mergers, a significant increase from three such deals in all of 2025, according to data from SPACInsider. These transactions now account for approximately 10% of all SPAC deals announced in 2026.

SPACs, which are publicly traded shell companies created to merge with a private firm, offer a path to public markets with more certainty on valuation and fundraising compared to a traditional initial public offering (IPO). This structure is particularly appealing for companies reliant on government contracts, which can have unpredictable development cycles.

"A SPAC merger can offer a more flexible route for companies with government contracts, strategic backing, or a clear growth pipeline, but not yet the revenue scale, margin, or predictability," said Kat Liu, Vice President at IPOX, in a comment to Reuters. One prominent example is U.S. rocket propulsion developer Ursa Major, which agreed to a $2.3-billion SPAC deal last month. CEO Chris Spagnoletti told Reuters the transaction allows the company to secure capital based on customer demand rather than being subject to the timing of IPO market windows.

Market Drivers and Context

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The trend is fueled by a convergence of factors, including a renewed focus on national security and rising geopolitical tensions. The Trump administration has proposed a $1.5 trillion national defense budget for 2027, a substantial increase from the $901 billion enacted for 2026. This has spurred investment in companies developing next-generation technologies like drones and advanced propulsion systems.

At the same time, the commercial space industry is experiencing a boom, driven by government and private spending on satellite networks and communications. The high-profile listing of Elon Musk’s SpaceX has further galvanized investor interest in the sector. In addition to SPACs, at least seven other defense and space companies have gone public through traditional IPOs this year, according to LSEG data, signaling broad issuer interest in the current market window.

Investor Outlook and Risks

Investors are showing a willingness to fund promising startups in the sector, even those without established revenue streams. "SPAC investors don’t necessarily need to see revenue, let alone profit, to buy into a promising startup," noted Matt Kennedy, a senior strategist at Renaissance Capital.

The pipeline for future deals remains robust. According to SPACInsider CEO Kristi Marvin, nine SPACs are currently seeking targets in the defense or space industries, holding a combined $2.35 billion in trust. However, the SPAC route carries risks, including potential share dilution and concerns about a lower level of scrutiny compared to IPOs. The performance of past deals has also been mixed, with some high-profile companies like Rocket Lab and Intuitive Machines trading down from their post-merger highs.