SPACs go through the typical IPO process, although the sponsors don’t publicly identify companies they are eyeing for an acquisition, to avoid a more complicated process with the Securities and Exchange Commission (SEC). A SPAC is formed by a group of sponsors, often well-known investors, private equity firms or venture capitalists. Here’s everything you need to know about SPACs’ general order of operations: You just need to understand that you won’t exactly know what the SPAC intends to buy until it announces an acquisition target. “But they do have access to a ‘blank check’ company as soon as it goes public,” before it’s acquired private company.īuying shares of a SPAC before it makes any acquisitions can provide regular investors with a way to share in the stratospheric growth many associate with IPOs. “Average investors are very unlikely to have access to the hottest IPO,” she says, at least until the company goes public and stock prices blast off. The latter involves banks that underwrite the deal, roadshows for potential investors and high levels of financial statements, notes Sylvia Jablonski, chief investment officer and co-founder at Defiance ETFs.Įveryday investors are often left out of an IPO, since share allocations are often reserved for high-net-worth and high-earning investors called accredited investors, adds Jablonski. Going public by agreeing to be purchased by a SPAC reduces the red tape and costs associated with a traditional IPO. “SPACs are giving management and boards of companies more options for quicker and more efficient ways to go public.” “The traditional process of going public could take years, in some cases, and finding the right timing can be tricky,” McNally says. SPACs are a way for companies to make the leap from privately held to publicly traded in a way that’s often less complicated than an initial public offering ( IPO), according to Peter McNally, global sector lead at Third Bridge, a research firm.
SPACs are a publicly traded vehicles that exist solely to raise money and acquire existing private companies. A SPAC is a special purpose acquisition company, also frequently called a blank check company.
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