Key facts
- Defense and space companies are increasingly using SPAC mergers to go public.
- SPAC mergers offer flexible valuations and faster market access compared to traditional IPOs.
- Ursa Major, a US defense firm, agreed to a $2.3 billion SPAC deal last month.
- Six defense, space, or satellite-related companies have announced SPAC mergers this year.
- Nine SPACs are currently seeking defense or space targets, with about $2.35 billion held in trust.
- Eric Trump is an investor in counter-drone company Space-Eyes, which has agreed to a SPAC deal.
Early-stage defense and space companies are increasingly turning to special purpose acquisition companies (SPACs) for public listings this year, seeking flexible capital and a quicker path to market amid heightened investor interest in the sector. Unlike traditional initial public offerings (IPOs), SPAC mergers allow companies to negotiate valuations privately and secure financing before going public, offering greater certainty.
Experts note that SPACs provide an easier route for smaller defense and space firms, which often have unpredictable revenue cycles tied to government contracts. IPOX Vice President Kat Liu stated that SPAC mergers are suitable for companies with government contracts or a clear growth pipeline but lacking the revenue scale or predictability of larger firms.
The current market environment, with a wave of blockbuster IPOs, also creates opportunities for SPACs as smaller companies aim to avoid competing for investor attention with larger deals. Ursa Major, a US defense firm specializing in missile and rocket propulsion systems, agreed to a $2.3 billion SPAC deal last month. CEO Chris Spagnoletti explained that the SPAC transaction would provide capital to meet customer demand that outpaces industry supply, allowing for expanded domestic production.
Data from SPACInsider shows that six defense, space, or satellite-related companies have announced SPAC mergers so far this year, representing about 10% of all SPAC deals, a notable increase from three such deals in all of 2025. In addition to SPACs, at least seven other defense and space companies have pursued traditional IPOs in 2026, according to LSEG data, indicating a strong window for issuers.
The space sector, in particular, is experiencing significant growth driven by increased government and commercial spending on satellite networks and communications, further boosted by investor interest following the listing of Elon Musk's SpaceX. Hypersonic flight company Stratolaunch is reportedly preparing for an IPO, and Sierra Space saw its valuation surge over 50% to $8 billion in a March funding round.
National security concerns have also fueled interest, with the Trump administration prioritizing strengthening US defenses and replenishing stockpiles. President Donald Trump has proposed a significant increase in defense spending for 2027. The evolving nature of warfare, with drones playing a larger role in conflicts, is creating opportunities for newer companies leveraging low-cost systems and advanced technologies.
The industry has attracted prominent political figures, with Eric Trump investing in counter-drone company Space-Eyes, which has agreed to a SPAC deal, and backing drone maker XTEND. Donald Trump Jr. has also been involved in defense and space investments.
Despite the advantages, early-stage defense and space companies remain vulnerable to supply chain disruptions and order delays, and reliance on a limited pool of government customers can lead to unpredictable revenue. Nine SPACs are currently seeking defense or space targets, holding approximately $2.35 billion in trust, suggesting potential for more deals. Quantum Space and Elroy Air announced SPAC deals in June, with Quantum Space backed by over $88 million in government contracts and Elroy Air securing a $46 million US Army contract. While SPAC mergers offer flexibility, they can also lead to shareholder dilution, and concerns about investor protections and scrutiny persist, though some analysts view these risks as manageable.