Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
Special purpose acquisition company
Market terminology

Special purpose acquisition company or SPAC: features of a shell company

09.03.2022
2 min read

Mechanism for the creation and operation of a special purpose acquisition company

Recently, the use of SPACs to go public has increased. This option eliminates the long and financially expensive IPO procedure. The Special purpose acquisition company itself is not a real firm, but an empty shell, whose function is to carry out mergers and acquisitions in order to enable a business to float on the stock exchange.
Despite the fact that SPACs have been known since the 1990s, they became popular and widely used about four years ago. In 2020 alone, the number of SPACs doubled compared to the previous period, while the proceeds from such offerings tripled. DraftKings, Virgin Galactic, Opendoor and others have recently taken advantage of this market entry option.
The first thing with which this mechanism of placing shares begins – the creation of SPAC, usually engaged in by large investors or well-known personalities. Such a company conducts an IPO, selecting the following features: industry, sector and type of activity, where the funds will be invested in the future. More often than not, when listed, the cost per SPAC share is around $10.Special purpose acquisition company: featuresThe capital raised during the IPO process goes into a trust account, which is similar to an escrow account used to purchase real estate. Further, in order for SPAC to buy a particular company, the consent of all the shareholders of the shell company must be taken.
The life span of a SPAC is short, within 2 years. If during this period, the business for takeover will not be selected, the shareholders of SPAC receive the funds invested at the cost of the IPO. In this case, all the costs are covered by the founder of such a company.
In addition to shares, SPACs issue warrants. They are a security that allows you to buy a company’s shares at a fixed cost. This option is an additional motivation to invest in the process of IPO in the void. In addition, the merger process with a real firm can use additional funds through distribution. Such a tool is called a PIPE Raise.
The advantage of a SPAC for its creator is the opportunity to multiply its investment primarily through its prominence and attracting investment for a future merger. In most cases, the founder owns 20% of SPAC shares at their nominal price, and later sells them at market price.
Buyers of securities of such a company can earn a significant amount in the future, which exceeds the income on bonds or deposits. In this case, there are clearly stipulated terms for the return of funds if the SPAC does not find an object to merge.
The benefit to a private company that plans to go public is saving money on the IPO procedure.

Tags: Market terminology
0
Previous Post Startup Eightfold received an investment from SoftBank for the development of personnel search technology Next Post How Danone discovered yogurt to the world

You Might Also Like

types of depository receipts
Market terminology
Types of depositary receipts: overview of instruments for acquiring shares
11.08.2021
dead cat bounce-2
Market terminology
The “dead cat bounce” pattern: what it is and the benefits of the strategy
27.02.2022
Black Swan
Market terminology
Black Swan: events that cannot be predicted
26.10.2022
expiration of contracts
Market terminology
What is the expiration of contracts on the futures market
28.01.2022
profit capitalization
Market terminology
Profit capitalization: features and functions
25.09.2020
soft market
Market terminology
Soft market: its impact on sellers and buyers
31.01.2023

Recent Posts

  • 1inflation in the UK
    Inflation in the UK will decline: analysts’ forecasts
    03.06.2023
  • 2Mary Erdoes
    Mary Erdoes: the most powerful woman on Wall Street
    02.06.2023
  • 3Pilatus Aircraft
    Pilatus Aircraft: the history of the Swiss aircraft manufacturer
    01.06.2023
  • 4investment triangle to select a particular asset
    Investment triangle: how to choose the best asset for investment
    31.05.2023
  • 5Nissan and Renault
    Nissan and Renault invest $600 million in a joint venture
    30.05.2023

Popular Posts

  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Skolkovo analysts: the Russian energy market is suffering losses
  • The Crypto industry records record growth in cybercrimes

Social media

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Press Secretary
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Press Secretary
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Press Secretary
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Press Secretary
16.05.2020

Latest Posts

inflation in the UK
Inflation in the UK will decline: analysts’ forecasts
03.06.2023
Mary Erdoes
Mary Erdoes: the most powerful woman on Wall Street
02.06.2023
Pilatus Aircraft
Pilatus Aircraft: the history of the Swiss aircraft manufacturer
01.06.2023

Chaslau Koniukh

Expert Chaslau Koniukh

Chaslau Koniukh – an expert in marketing and project management, IT consulting, international investments, investor, financial analyst. A commodity trader, private consultant, entrepreneur, lecturer, author of several articles on the stock market.

Popular Posts

  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Skolkovo analysts: the Russian energy market is suffering losses
  • The Crypto industry records record growth in cybercrimes
  • Japanese electronics manufacturer Pioneer is ready to return to the market
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram
  • Biography

Chaslau Koniukh – an expert in marketing and project management, international investments, financial analyst.

Social media

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics