Q&A: How Do Special-Purpose Acquisition Companies Work?

Q&A: How Do Special-Purpose Acquisition Companies Work?
Carl Hazeley

about 3 years ago1 min

Question from Finimizer Neelofar in London: “How do special-purpose acquisition companies (SPACs) work?”

Answer from lead analyst Carl: “SPACs are essentially shell companies that exist only to list on the stock market and raise money from public investors, which they can then use to buy other companies. Historically, private investors who wanted to sell their stake to public investors would need to do so via the stock market – which might’ve involved the long and expensive process of an initial public offering. SPACs, though, are already listed. And since the value of their shares automatically mirrors those of the private company they merge with, it’s easy for investors to cash out. There’s a time frame on all this, mind: any SPAC that hasn’t bought a private company within a couple of years generally has to return the money it initially raised back to its shareholders.”

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