"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:
- can speed up the IPO process (1-2 years for a normal IPO, 6 months to 1 year for a SPAC), since the company for the IPO isn't specified, so the market is kept "in the dark" and there's less overhead (disclosures, etc.) during the IPO process
- immediate access to both private and public investors in the IPO (whereas in a normal private equity IPO it would only be private investors, but the SPAC is publicly available)
- stability and certainty for early investors in the IPO, since the money will either be turned into an IPO or returned within 2 years