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Special purpose acquisition company (SPAC) | Lionbliss

Updated: Feb 17, 2022


A special purpose acquisition company (SPAC; /spæk/), also known as a "blank check company", is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process.[1][2] According to the U.S. Securities and Exchange Commission (SEC), "A SPAC is created specifically to pool funds in order to finance a merger or acquisition opportunity within a set timeframe. The opportunity usually has yet to be identified".[3] SPACs raised a record $82 billion in 2020,[4] a period sometimes referred to as the "blank check boom".[4][2][5][6] Because a SPAC is registered with the SEC and is a publicly-traded company, the general public can buy its shares before the merger or acquisition takes place. For this reason they've been referred to as the 'poor man's private equity funds.'[7] Academic analysis shows the investor returns on SPACs post-merger are almost uniformly heavily negative (however, sponsors at the flotation of the SPAC can earn excess returns),[8] and their proliferation usually accelerates around periods of economic bubbles, such as the everything bubble in 2020–2021, when the volume and quantity of capital raised by SPACs set new all-time records.[5] - Wikipedia

Well-Known Companies That Have Gone Public Through a SPAC

Some of the best-known companies to have become publicly listed by merging with a SPAC are: digital sports entertainment and gaming company DraftKings; aerospace and space travel company Virgin Galactic; energy storage innovator QuantumScape; and real estate platform Opendoor Technologies. (

"Key Takeaways"

  • A special purpose acquisition company (SPAC) is formed to raise money through an initial public offering (IPO) to buy another company.

  • At the time of their IPOs, SPACs have no existing business operations or even stated targets for acquisition.

  • Investors in SPACs can range from well-known private equity funds and celebrities to the general public.

  • SPACs have two years to complete an acquisition or they must return their funds to investors.


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