A Special Purpose Acquisition Company (SPAC) is a unique entity created with the goal of merging with an undisclosed target company or carrying out a business combination. Typically established by sponsors, including investment banks and industry leaders, SPACs aim to leverage their expertise and reputation to execute successful mergers and take companies public. While some SPACs focus on specific industries, others may have a broader investment approach.


SPAC sponsors typically contribute 10% of the total post-IPO capital, covering the IPO costs and ongoing expenses. In return, sponsors receive founder's shares equivalent to around 20% ownership in the post-IPO company. Sponsors profit only if a merger is completed successfully, leading to an increase in the value of their ownership.


Following the IPO, SPACs secure funds in escrow, usually 100% or at least 90%, until a business combination is finalized within a specific timeframe. Shareholders who disagree with the merger have the option to convert their shares into a share of the escrowed funds.


A SPAC must complete a business combination within 24 months, extendable by one year with shareholder approval. Failure to do so results in the return of funds to shareholders, and sponsors risk losing their investment.

Initial Public Offering
Reverse Takeover
Direct Public Offering
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