SPACs (Special Purpose Acquisition Companies) are the new fashion of the American stock exchanges for listing on the stock exchange, which arose as a result of the difficulties of the stock exchanges in attracting companies, especially due to their regulation, as it was more attractive for them to resort to methods such as venture capital and risk capital, thus opening up new and quicker ways for investors.
They are entities that are created to raise capital on the stock markets with the aim of later intervening or participating in merger and acquisition operations of other companies, and are known for being tools for taking private companies public, without the need to go through takeover bids (public takeover bids). They are pass-through companies or special purpose vehicles, which disappear once the merger or acquisition is completed.
Characteristics
This type of investment company is characterised by:- Being companies without operations or with a specific corporate purpose
- Entering the stock market without having acquired any company or only with the intention of doing so
- Once the financing has been obtained, they have two years to complete the operation, otherwise the capital will be returned to the investors.PurposeThis system has become, for companies and start-ups, a fast track for entry into the most important stock exchanges in the United States.SPACs, once the acquisition or merger transaction has been completed, the acquired company joins the SPAC.
This is known as a "reverse merger". Once this process is completed, the SPAC disappears and the new company emerges, which replaces its predecessor in its place on the stock exchange, becoming a regular listed company.Advantages and disadvantagesIt can be seen as a flexible and attractive investment mode.
The characteristics of the operation allow it to be faster and cheaper, with "lower" risk than in a different context or entity. The return lies in the successful acquisition or merger of the target company. There are no investor limits and liability is limited. At the same time, there is a guarantee of return of capital in the event of failure to meet the SPAC's objectives; however, it is a very open investment. The promoters are given "carte blanche" to acquire those companies they consider appropriate, with the risk involved in investing indirectly in companies unknown to the investor.
Finally, and equally important, these figures were very popular in the 80s and 90s, often associated with fraud. It is important, before making any investment, to know clearly where, how and with whom you are investing in order to avoid greater evils in the future.
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