SPAC IPOs

A blank check company, also called a Special Purpose Acquisition Company (SPAC), is a newly-formed investment vehicle that raises money in an IPO and then has about two years to find a company to take public via acquisition. Before the acquisition, SPACs are differentiated by their management teams, which can include veteran investors or industry experts. These sponsors typically kick in a small upfront investment in order to receive about 20% of the shares in a SPAC pre-merger.

SPACs typically price their IPOs at $10, and offer tradable units that contain common shares and out-of-the-money warrants. Because traditional IPOs remain the gold standard for listing, SPAC merger targets may include moonshots, companies that are novel or difficult to value, unusual transactions, or those with messy governance structures. After management finds a merger target and agrees upon a valuation, public shareholders can eventually vote to approve the deal, but also have the option of redeeming their shares to receive the original $10 plus interest.