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SPAC

SPAC

“SPAC” stands for special purpose acquisition company.

A SPAC is a company that serves no business purpose other than to raise money via an IPO in order to acquire an existing company. In order to make an IPO, the SPAC doesn’t even need to specify a company it wishes to acquire, but it must return any capital to investors within 2 years if an acquisition is not made. Since SPACs don’t need to specify any acquisitions at the time of IPO, they are often referred to as “blank check companies”. All capital invested in a SPAC is placed in a trust account that can only be disbursed upon aquisition or liquidation of the SPAC.

SPACs provide the following advantages over normal “private equity” IPOs: