Fantasy Financials: How SPAC Projections Were 10x Reality
In a traditional IPO, companies are prohibited from including forward-looking financial projections in their offering materials. The SEC considers such projections inherently unreliable and potentially misleading. But SPACs operate under different rules. Thanks to safe harbor provisions in the Private Securities Litigation Reform Act (PSLRA), SPAC merger presentations can — and did — include wildly optimistic revenue and profit projections.
The result was an epidemic of fantasy financials. Companies projected revenues 10 to 50 times what they actually delivered. And nobody was held accountable.
The Safe Harbor Loophole
The PSLRA, passed in 1995, provides a "safe harbor" that protects companies from lawsuits over forward-looking statements — as long as those statements are accompanied by meaningful cautionary language identifying risk factors. This was originally designed to encourage companies to share useful guidance with investors.
SPAC sponsors weaponized this provision. Every SPAC merger presentation included pages of revenue projections — hockey-stick graphs showing exponential growth — followed by boilerplate risk disclaimers. The projections were the selling point. The disclaimers were the legal shield.
Traditional IPOs explicitly cannot do this. The SEC requires that S-1 filings (the registration statement for an IPO) contain only historical financial data, audited by independent accountants. You can't sell an IPO on projected 2025 revenue. You sell it on actual, audited numbers.
SPACs sidestepped this entirely. The merger proxy statement — which is the equivalent of an IPO prospectus — routinely included multi-year revenue projections that had no basis in operational reality.
Case Studies in Fantasy
Nikola: $3.2B Projected, $0 Delivered
Nikola's SPAC merger presentation projected $3.2 billion in revenue by 2024. The company's actual cumulative revenue through bankruptcy: less than $50 million. That's a miss of approximately 98.5%. The projections showed a straight line from zero to billions. Reality showed a straight line from zero to bankruptcy.
Lordstown Motors: 100,000 Orders That Didn't Exist
Lordstown's merger presentation claimed 100,000 pre-orders for its Endurance pickup truck, implying billions in future revenue. Hindenburg Research found that many of these "orders" were non-binding expressions of interest from entities with no purchasing capability. The company delivered approximately zero vehicles before bankruptcy.
Canoo: Revenue Projections From a Company With Zero Revenue
Canoo projected hundreds of millions in revenue within two years of its SPAC merger. The company filed for bankruptcy in January 2025 with effectively zero revenue from vehicle sales. The projection-to-reality ratio was effectively infinite.
Bird Global: Profitability That Never Came
Bird Global's SPAC presentation projected profitability by 2023. The company instead filed for bankruptcy in December 2023 with $3.3 million in cash. Not only did projected profits not materialize — the company couldn't even stay alive.
Why Nobody Hit Their Numbers
1. No consequence for missing: The safe harbor provision meant that companies faced no legal liability for projections that turned out to be wildly wrong. There was literally no downside to projecting aggressively.
2. Incentive to project high:The SPAC sponsor's promote is worth more if the implied valuation is higher. Higher revenue projections justify higher valuations, which justify higher share prices, which make the promote worth more. The incentive runs in exactly one direction.
3. Investor confirmation bias: Retail investors who bought into the EV revolution, the cannabis opportunity, or the space economy wantedto believe the projections. The numbers confirmed their thesis, so they didn't question them.
4. No independent verification:SPAC merger projections weren't audited. They weren't verified by independent analysts. They were created by the SPAC sponsor and the target company — the two parties with the most to gain from inflated numbers — and presented as if they were credible financial forecasts.
The SEC's 2024 Response
In January 2024, the SEC finalized new rules that eliminated the safe harbor protection for forward-looking statements in SPAC merger transactions. Under the new rules, SPAC projections are subject to the same liability standards as traditional IPO disclosures.
This is the right policy. It came approximately four years too late. By the time the SEC acted, the1,522 SPAC IPOs had already raised $362.7B using exactly the projections that are now prohibited. The 29 bankruptcies had already happened. The $4.8B in retail losses had already been locked in.
The lesson: When a company can project whatever revenue it wants with zero legal accountability, it will project whatever revenue makes the deal close. Every SPAC projection should have been read as fiction. The SEC now agrees — but only after the damage was done.
Projection data from SPAC merger proxy statements and investor presentations filed with the SEC. Actual revenue figures from quarterly earnings reports and bankruptcy filings.