Bill Ackman's "Blank Check" Company

Bill Ackman's "Blank Check" Company

over 3 years ago2 mins

Mentioned in story

Legendary investor Bill Ackman is planning a $3.5 billion initial public offering (IPO) of a “blank check” company with a free rein to buy other businesses at will 🗒 Watch this space…

What does this mean?

A “special-purpose acquisition company” (SPAC) lists on the stock market in order to raise money from public investors. But it doesn’t actually do anything: it has no revenue or profit of its own. A SPAC’s only goal is to find another (usually private) company to merge with and effectively morph into 🧟 In a sense, it’s a less long-term version of the buy-and-hold strategy favored by another billionaire, Warren Buffett – only using public markets to finance purchases of private firms.

SPACs are tried-and-tested investment vehicles. For instance, space travel company Virgin Galactic last year “went public” by taking over an already-listed SPAC 🚀 After some administrative work changing the company’s name and stock ticker, investors could buy into Virgin Galactic directly.

Why should I care?

Blank check companies are popular on both sides of the pond: in the UK, Non-Standard Finance went public in 2015 as a SPAC focused on lending firms, prominently backed by (in)famous investor Neil Woodford. And their popularity’s growing: last year, blank check companies raised some $13 billion 💵 One reason might be the discount to the value of the cash raised investors often get when they first buy in – which promptly disappears once it’s spent.

Daily Brief Image

Private companies that are bought by SPACs get something out of the deal too. They end up with publicly traded shares and the opportunity to easily reach more shareholders without the rigmarole and expense of an IPO 🤝 Furthermore, having to negotiate a sale price with a single party – rather than numerous potential investors – helps reduce the chances of shares encountering wild initial swings in their value.

Daily Brief Image


All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG