What is a SPAC?
- The magic is to create a new public company with the sole purpose of acquiring a startup. This is called a SPAC.
- Prior to acquiring another business, the SPAC has no operating business of its own; it’s just a pile of cash. With no history, the listing documents are simple and almost entirely boilerplate.
- The goal of the SPAC is to use its cash to acquire a private company, turning the target into a public company. The SPAC has 2 years to find and acquire a business or the SPAC is dissolved and the cash returned to the original investors.
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Important ⚡⚡⚡
Generally, the transition from private to public is a key time for private investors to cash in and earn the returns they were expecting.
Private shareholders may hold onto their shares in the public market or sell a portion or all of them for gains.
“Without a sense of purpose, no company, either public or private, can achieve its full potential; it will ultimately lose the license to operate from key stakeholders.”
LARRY FINK
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