1 Securities Practice Guide § 6.04

Summary

• [1] Introduction

  Special purpose acquisition companies, commonly known as “SPACs,” are publicly traded shell companies that allow their sponsors to raise capital through an initial public offering for use in commencing a search to acquire one or more operating companies within a fixed time frame. As such, a SPAC serves as an alternative to traditional financing vehicles or private equity funds. A SPAC is similar to a “blind pool” or “blank check company” in that it has no operating business or revenues at the IPO stage. In the past, “blind pools” and “blank check” companies have been associated with questionable practices, but in recent years, and especially in 2020 and 2021, SPACs managed to overcome many of those negative associations, as shown by the increase in SPAC offerings during those years and the interest and involvement of larger private equity funds, hedge funds and bulge bracket investment banks in such offerings. The SPAC can provide private equity managers with access to ...