Shares of special-purpose acquisition companies and firms they have taken public are tumbling, punishing individual investors who piled into the once-hot sector.

The Defiance Next Gen Spac Derived Exchange-Traded Fund, which tracks companies that have gone public through Spacs along with Spacs that have yet to do any deals, has fallen about 30% in the past three months and recently hit a six-month low. Popular firms tied to the sector such as electric-car-battery company QuantumScape and space-tourism firm Virgin Galactic Holdings are down 50% or more during that span. Spacs listing splashy firms such as electric-car startup Lucid Motors and personal finance company Social Finance are also taking a beating.