There's been an uptick in cancellations of special purpose acquisition company (SPAC) mergers, with three since Thanksgiving and eight since the beginning of Q4.

Why it matters: After the SPAC euphoria of 2020 and early 2021, the market is continuing its reverse trip to Earth.

Driving the news: FAST Acquisition Corp. and Fertitta Entertainment canceled their merger on Friday, as did Pathfinder Acquisition Corp. and ServiceMax earlier this week.

• Other high-profile combinations that have fallen through this quarter include Northern Star Investment Corp. II and Apex Fintech Solutions, and Valo Health and Khosla Ventures Acquisition Co.

By the numbers: There were seven terminations for all of Q3, none in Q2, one in Q1 and seven in all of 2020, per SPAC Research.

• As of Thursday, there have also been three recut deals and 10 minimum cash restructurings in Q4.

Between the lines: Deal terminations are a lagging indicator, says SPAC Research founder Ben Kwasnick.

• The increase can be traced in part to a recent wave of merger close deadlines, pushing the parties to either consummate or walk away.
• Many are citing “market conditions” as the reason for walking away, which makes sense given the rise in stock redemptions that began this summer. If a SPAC is now trading below $10 and redemptions mean there’s no longer enough cash in trust to meet the deal’s requirements, the target may opt out.
• Or if the parties don’t think the initial valuation will be supported by investors, the target company may decide it’s better to remain private for now.

Yes, but: There are always outliers. BuzzFeed, for example, went ahead with the merger despite a 94% redemption level.

• Conversely, the Wynn Interactive and Austerlitz Acquisition Corp. I cancellation was a surprise. “Gaming is hot, gaming remains desirable, top quality sponsor … I definitely didn’t expect that one to fall apart,” says Kwasnick.

The intrigue: Deal terminations are still in line with the overall level of SPAC activity.

• There were 121 live deals at the beginning of this quarter and 150 at the beginning of Q3 — many times more than any quarter since the start of 2019. But Kwasnick expects that to change.
• Also: “It’s interesting that IPOs are still getting done, lots of them,” he adds. “The market has found an equilibrium with IPOs ... if you just overfund the trust account, shareholders will back anything — but that phenomenon is expensive for sponsors because the overfunding comes from their pockets.” So it’s unclear how long that will last.

The bottom line: We might be past the “anything goes” SPAC era.

The SEC is ramping up its scrutiny of SPACs. Chairman Gary Gensler revealed on Thursday that he’s asked his staff to propose ways to increase the information provided to investors by reviewing disclosure requirements, marketing practices, and liability for SPAC insiders like sponsors and bankers.

Why it matters: Gensler made it clear he wants his agency to be active in reigning in threats to orderly markets.

What he's saying: "Functionally, the SPAC target IPO is akin to a traditional IPO. Thus, investors deserve the protections they receive from traditional IPOs," said Gensler.

• "I think that these innovations around SPAC target IPOs remind us that there may be room for improvements in traditional IPOs as well. Broadly, though, the '33 Act protections have stood the test of time."

Between the lines: "SPAC target IPOs often are announced with a slide deck, a press release, and even celebrity endorsements. The value of SPAC shares can move dramatically based on incomplete information, long before a full disclosure document or proxy is filed," he said on Thursday.

• One example: The announcement of Donald Trump's media company merging with a SPAC is a case where nearly nothing about the business was known (and much remains unknown). The SEC is investigating the deal.

Flashback: Gensler is on record about potential problems with SPACs since at least May, and the vehicles have been on the SEC's Agency Rule List since June.

• Last April, the agency's corporation finance division issued guidance on warrants accounting, briefly chilling the formation of new SPACs.

Meanwhile, the SPAC industry has been getting its ducks in a row in Washington as well. A group of market participants formed the SPAC Association back in May, hiring the Vogel Group and Van Heuvelen Strategies to lobby on its behalf, per Politico.

• The Vogel Group formally registered to represent the association this week, per federal filings.

The U.S. has been at the center of the SPAC activity over the past two years, but Europe is working to catch up, albeit unevenly.

Driving the news: This week, the duo behind Pegasus Acquisition Company Europe — ​​French billionaire Bernard Arnault and former UniCredit head Jean Pierre Mustier—announced a second SPAC that will also list in Amsterdam.

• It will seek to raise 200 million euros ($226 million).

The big picture: After the American SPAC boom spilled into Europe at the beginning of the year, local SPAC activity dried up at the start of the second half.

• Since then, it’s picked up again, and more than 30 SPACs have gone public on European exchanges.
• Amsterdam is the top listing destination right now, with Frankfurt coming in second.
• However, the U.K. is hoping to catch up after revising its safe harbor rules to be friendlier to SPACs and more in line with U.S. regulations.

What to watch: How well European-listed SPACs can attract local target companies that could otherwise merge with American SPACs.

• Better.com delays close of $7.7B reverse merger after mass layoffs (Axios)
• Why Are SPAC Targets So Young? (Crunchbase News)
• A Surge in Trading Preceded Trump’s SPAC Deal (NYT)
• SPACs are beating out traditional IPOs in 2021 (Axios)

BuzzFeed isn't the only media company to have been lured by the SPAC mania.

• Question: Which digital media company's SPAC talks ultimately fell through earlier this year? (Answer at the bottom.)