At a time when one big-name U.S. financier after another is starting a blank-check firm to hunt for deals, Canadian investors are forming fewer and fewer of the vehicles.

The number of special purpose acquisition companies going public in Canada has fallen for two straight years, to just 25 last year, less than a third of the 91 SPACs formed in 2018, according to data compiled by Bloomberg. In that same span, the number of U.S. SPACs exploded almost fivefold to 230 last year.

Driving the SPAC rush in the U.S. has been a flood of high-profile investors like hedge fund manager Bill Ackman and venture capitalist Chamath Palihapitiya, as well as names less associated with finance, like former U.S. House Speaker Paul Ryan and Oakland A’s executive Billy Beane, of “Moneyball” fame.

By contrast, Canada’s SPAC market has often been used in the mining industry and to take fledgling cannabis companies public as the nation legalized recreational marijuana. But with the pot boom fading and surging equity markets easing the path for traditional IPOs, the need for the more specialized vehicles has waned.

“A lot of people want to see what’s going to happen to some of these high-profile, very large SPACs in the U.S.,” said Michael Shuh, managing director and head of Canaccord Genuity Group Inc.’s financial institutions group. “Canada will have its own experience, but it will be more muted.”

Canaccord has been the top arranger of SPACs in Canada for the past two years, according to data compiled by Bloomberg. The firm handled seven SPACs with a total value of $718.9 million last year and 13 deals valued at $1.53 billion in 2019.

The firm was also Canada’s top arranger of traditional IPOs over that time, benefiting from rising interest in technology companies including Docebo Inc. and Dye & Durham Ltd., along with activity in the cannabis and mining sectors. The total volume of IPOs by Canadian companies climbed to C$7.38 billion in 2020, the highest since 2006.

“Regular-way IPOs are working, and markets are rewarding them,” Shuh said. “So there’s no need for a SPAC to take those companies public because they were ready to go anyway, and people were able to figure out their valuation easily.”

Even before the U.S. overtook Canada in SPAC creation, the size of U.S. deals dwarfed those of its neighbor to the north. In 2016, when the countries produced the same number of SPACs, the average value of a U.S. SPAC was US$277.4 million, compared with $6.32 million in Canada.

But while still small by U.S. standards, Canadian SPACs have been growing in size. The average value of a Canadian SPAC was $29 million last year, more than four times the 2016 figure

That reflects a few factors, including the maturation of the cannabis market. Last year’s biggest SPAC raised in Canada was the US$293.1 million Subversive Real Estate Acquisition Corp. deal. The company last week announced a qualifying transaction to combine with InterCure Ltd., an Israeli cannabis company, which will have former Israeli Prime Minister Ehud Barak as chairman.

The trend also may show a broadening acceptance of the vehicles beyond their traditional sectors. Last year’s second-largest SPAC in Canada was the US$265.6 million NextPoint Acquisition Corp. deal. That firm said it would seek to acquire a financial-services or alternative-lending company.

Even if SPACs resume their upward trajectory in Canada, they’re likely to remain smaller and less numerous than they are in the more aggressive U.S. market, said Peter Graham, managing director for special situations investment banking at Echelon Wealth Partners.

While their use is expected to be broad-based in the U.S., in Canada they’ll probably remain concentrated among experienced management teams that think they can use a SPAC to add value to a company in the sector they’re knowledgeable about, he said.

“It will continue to be a trickle until we see a few more successful, Canadian-listed SPAC qualifying transactions announced and closed,” Graham said.