In addition, the target of the acquisition must have a fair market value that is equal to at least 80% of the SPAC's net assets at the time of acquisition. In practice, SPAC sponsors often extend the life of a SPAC by making a contribution to the trust account to entice shareholders to vote in favor of a charter amendment that delays the liquidation date. Įach SPAC has its own liquidation window within which it must complete a merger or an acquisition past this deadline the SPAC will dissolve and return assets to its stockholders. A SPAC's trust account can only be used to fund a shareholder-approved business combination or to return capital to public shareholders at a charter extension or business combination approval meeting. ![]() īy market convention, 85% to 100% of the proceeds raised in the IPO for the SPAC are held in trust to be used at a later date for the merger or acquisition. The common share price must be added to the trading price of the warrants to get an accurate picture of the SPAC's performance. In addition, the public currency enhances the position of the SPAC when negotiating a business combination with a potential merger or acquisition target. Trading liquidity of the SPAC's securities provide investors with a flexible exit strategy. ![]() Commonly, units are denoted with the letter "u" (for unit) appended to the ticker symbol of SPAC shares. SPACs generally trade as units or as separate common shares and warrants on the Nasdaq and New York Stock Exchange (as of 2008) once the public offering has been declared effective by the SEC, distinguishing the SPAC from a blank check company formed under SEC Rule 419. Proliferation of SPACs usually accelerates around periods of economic bubbles, such as the " everything bubble" between 20. ĭespite the popularity and growth in the number of SPACs, academic analysis shows investor returns on SPAC companies post-merger are almost uniformly negative, although investors in SPACs and merged companies with may earn excess returns immediately after the merger. The majority of companies pursuing SPACs do so on the Nasdaq or New York Stock Exchange in the US, although other exchanges, such as the Euronext Amsterdam, Singapore Exchange, and Hong Kong Stock Exchange, have also overseen a small volume of SPAC deals. ![]() For this reason they have at times been referred to as the "poor man's private equity funds". The general public may buy their shares on stock exchanges before any merger or acquisition takes place. In the US, SPACs are registered with the SEC and considered publicly-traded companies. Securities and Exchange Commission (SEC), SPACs are created specifically to pool funds to finance a future merger or acquisition opportunity within a set timeframe these opportunities usually have yet to be identified while raising funds. A special purpose acquisition company ( SPAC / s p æ k/), also known as a " blank check company", is a shell corporation listed on a stock exchange with the purpose of acquiring (or merging with) a private company, thus making the private company public without going through the initial public offering process, which often carries significant procedural and regulatory burdens.
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