>
> I cannot reproduce this using the recipe in the Bugzilla report, neither 
> in Emacs 27.2 nor in the current master branch.  I see no hang.
>

The recipe isn't precise enough:

emacs -Q foo.mod
set SPC PROD SPC : SPC

Emacs hangs after the second SPC.  This bug is an old one, Emacs 24 has 
the same problem.  In fact an ever shorter recipe also works:

emacs -Q foo.mod
: SPC

>
> If C-g interrupts the hang, please set debug-on-signal non-nil, repeat 
> the recipe, press C-g, and post the Lisp backtrace here.
>

You probably meant "debug-on-quit".  Here is the backtrace:

smie-default-backward-token()
m2-smie-refine-colon()
m2-smie-backward-token()
smie-blink-matching-open()
self-insert-command(1 32)
funcall-interactively(self-insert-command 1 32)
call-interactively(self-insert-command nil nil)
command-execute(self-insert-command)

And here is the patch.