SPAC

SPAC (Special Purpose Acquisition Company) is a type of investment vehicle that is created for the purpose of raising Capital through an IPO (Initial Public Offering) to acquire an existing company. SPACs are often referred to as “blank Check companies” because they have no commercial operations and seek to merge with or acquire a Private Company, allowing that company to become publicly traded without going through the traditional IPO process.

Once a SPAC goes public, it typically has a set period (usually 18 to 24 months) to find a target company to acquire. If it fails to do so, it must return the funds to its investors.

Examples of SPACs include:

  • Pershing Square Tontine Holdings: Formed by Bill Ackman, this SPAC raised $4 billion in 2020 with the intent to acquire a Private Company.
  • Churchill Capital Corp IV: This SPAC announced a merger with Lucid Motors, an electric vehicle manufacturer, in 2021.
  • DraftKings: The sports betting company went public through a SPAC merger with Diamond Eagle Acquisition Corp in 2020.

Cases of SPACs include:

  • SoFi: Merged with Social Capital Hedosophia V in 2020, allowing the Fintech company to go public.
  • NIKOLA: The electric vehicle company went public via a merger with VectoIQ Acquisition Corp in 2020, although it later faced controversy and scrutiny.