What is a SPAC?

What is a SPAC?

A SPAC (Special Purpose Acquisition Company) is created for the sole purpose of raising capital, going public and to acquire another company.

How does a SPAC work?

SPACs go public the same way any other company does. However, SPACs are subject to a different set of rules and regulations since they are raising capital in "blank check" format. This is because the use of proceeds raised in their offering will be applied in a transaction that isn't known and can't be described until they have negotiated an acquisition. Investors are trusting management to identify, negotiate and structure a good deal on their behalf. However, investors have the right to review any proposed deal, go along for the ride or receive a pro-rata share of the cash raised.

Why do people start or invest in SPACs?

People create SPACs, bankers raise capital and investors plow in because they all believe the publicly listed "shell" can acquire a private company on terms that are very favorable to the special purpose acquisition company shareholders. 

Why do private companies like being acquired by SPACs?

Private companies are attracted to SPAC transactions because it provides a faster and easier way to go public, often with a pile of cash to be used for operating purposes and access to investment bankers.

What kind of companies are SPACs trying to acquire?

Special purpose acquisition companies are only interested in very large or otherwise compelling businesses which will attract institutional investors, capital, talent and trading volume. As a consequence, earlier stage companies need to rely on the direct listing process to go public, rather than on a SPAC transaction.

Is it smart to invest in SPACs?

All investments have risk and there are additional risks when investing into a shell that has no operating history or stated purpose other than acquiring an undisclosed business. While some SPACs have performed well, there's no way to know whether the next one does well. It's very important to read the Risk Factors in any prospectus and consult with professionals before making any investment.

Can you create a special purpose acquisition company for us?

We help entrepreneurs develop a go-public strategy, tap into our network to build the professional team, and manage the process to facilitate a direct listing, reverse merger or initial public offering. We can help form a SPAC if desired. Our services help entrepreneurs take their company public so they can recruit talent, raise capital, complete acquisitions, and create significant wealth. Connect with us to learn more.

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