The SPAC Compliance Crossroads: Oak Woods' Struggles and the Lessons for Investors

The recent delinquency notice issued to Oak Woods Acquisition Corporation (NASDAQ: OAKU) by Nasdaq on May 27, 2025, has thrust the SPAC into the spotlight, exposing vulnerabilities that resonate far beyond its balance sheet. With its delayed Form 10-Q filing and a tangled web of deadline extensions for its business combination, Oak Woods exemplifies the growing risks investors face in a SPAC sector increasingly strained by regulatory and operational pressures. This case is not merely a corporate hiccup—it is a cautionary tale demanding scrutiny of how SPACs navigate compliance, timelines, and investor trust in an era of heightened scrutiny.

The Compliance Crucible: Delays and Nasdaq's Timeline

The core issue lies in Oak Woods' failure to file its Q1 2025 10-Q by April 29, 2025—a delay attributed to finalizing audit procedures, not disagreements with auditors. While Nasdaq's delinquency letter does not immediately delist the company, the 60-day window to submit a compliance plan (ending late July 啐 2025) is a critical hurdle. Even if accepted, Nasdaq may grant an 180-day extension, pushing compliance to November 17, 2025. This timeline underscores the precarious balancing act SPACs face: meeting regulatory deadlines while racing to finalize business combinations.

The stakes are high. Should Oak Woods fail to file by the extended deadline or secure its business combination by June 28, 2025, its shares risk being forced into redemption, with investors facing potential losses. This scenario highlights a systemic flaw in SPAC structures: their reliance on ever-expanding deadlines to avoid collapse.

The Deadline Extension Dilemma: A Losing Game?

Oak Woods' repeated extensions of its business combination deadline—from September 2024 to June 2025—reveal a pattern of operational strain. Each extension required shareholder approval and monthly $172,500 Trust Account deposits, a costly and credibility-draining process. The SPAC's sponsors have now exhausted five of six allowable extensions, leaving investors to wonder: How many more delays can the market tolerate?

The mixed institutional investor activity further amplifies uncertainty. While Toronto Dominion Bank significantly increased its stake, entities like Westchester Capital Management and CrossingBridge Advisors liquidated entirely—a divergence that signals deepening skepticism about Oak Woods' prospects.

Broader SPAC Sector Vulnerabilities: A Wake-Up Call

Oak Woods' struggles are not isolated. The SPAC boom of 2020–2021 has given way to a reality where nearly 40% of SPACs have failed to complete their business combinations, with many others battling regulatory delays. This case underscores two systemic risks:

1. Regulatory Rigidity: Nasdaq's tightening scrutiny of SPAC filings—evidenced by its delinquency notices—signals a shift toward accountability. SPACs that prioritize speed over compliance risk penalties or delisting, eroding investor trust.
2. Timeline Certainty: SPAC investors are increasingly penalizing sponsors who stretch deadlines beyond reasonable limits. Each extension dilutes the “use it or lose it” incentive, undermining the SPAC's core value proposition.

The Investor Playbook: Prioritizing Prudence

For investors, Oak Woods' saga demands a revised checklist when evaluating SPACs:
- Regulatory Adherence: Prioritize SPACs with clean compliance records and transparent communication about audit and filing timelines.
- Deadline Realism: Favor those with credible, near-term business combination targets and sponsors with financial flexibility to avoid excessive extensions.
- Trust Account Health: Monitor monthly Trust Account deposits and extension limits—the fewer the extensions, the stronger the SPAC's negotiating position.

Conclusion: A SPAC's Lifeline or a Death Spiral?

Oak Woods' path forward hinges on two concurrent achievements: finalizing its Q1 10-Q and sealing a business combination within weeks. Yet even success would leave its shares trading at a discount to its Trust Account value unless the market perceives tangible value creation. For investors, this case is a clarion call: the SPAC sector's survival depends on operational discipline and regulatory respect. Those SPACs that cannot meet these standards may find themselves, like Oak Woods, racing not just against time—but toward obsolescence.

The lesson is clear: in the SPAC arena, compliance is no longer optional—it is the ultimate differentiator between a viable investment and a ticking time bomb.