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1/ SPAC 101 The Special Purpose Acquisition Company (“SPAC”) has grown in prominence in recent years, most recently appearing in the news with @BillAckman’s unicorn SPAC and @nikolamotor’s successful market debut. But what is a SPAC and how does it work? Here’s SPAC 101!
2/ A SPAC is used to take a company public without going through the traditional IPO process. The SPAC is a shell company (i.e. it has no formal operations) that is taken public via an IPO to raise money from investors. It is often called a blank check company.
3/ The founder of the SPAC then hunts for a deal, looking for a private company to merge with. Once a target is identified, the SPAC merges with the private company, taking the private company public, but without the IPO grind. The SPAC effectively becomes one with the target.
4/ What are the primary benefits and drawbacks for a target company? Benefits: ▪️Certainty of a deal ▪️Process ease ▪️Flexible structure (warrants, etc.) ▪️Lower compliance hurdles Drawbacks: ▫️Higher effective fees ▫️No market check on price
5/ As with all novel financial concepts, there are some real tradeoffs. Keep an eye on how this space develops as more private companies look for alternatives to the traditional IPO process (e.g. direct listings, SPACs, etc.). That was SPAC 101. I hope it was helpful!

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