What is a SPAC? Understanding Special Purpose Acquisition Companies
In recent years, Special Purpose Acquisition Companies (SPACs) have gained popularity as an alternative method for companies to go public. But what exactly is a SPAC, and how does it work? In this article, we will delve into the world of SPACs to provide you with a clear understanding of these unique investment vehicles. Introduction to SPACs A SPAC is a shell company that is created for the sole purpose of raising capital through an initial public offering (IPO). The funds raised through the IPO are placed into a trust account and are used to acquire a private company. The SPAC then merges with the target company, taking it public without the traditional IPO process. How do SPACs work? SPACs are typically created by a group of seasoned investors or industry professionals who have a specific industry or sector in mind for their acquisition target. Once the SPAC raises funds through its IPO, it has a limited amount of time, usually around two years, to identify and acquire a suit...