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For those wondering what the heck a SPAC is, this seems to be what it's about: https://en.wikipedia.org/wiki/Special-purpose_acquisition_company https://en.wiki

For those wondering what the heck a SPAC is, this seems to be what it's about: https://en.wikipedia.org/wiki/Special-purpose_acquisition_company https://en.wikipedia.org/wiki/Special-purpose_acquisition_co... > A special purpose acquisition company (SPAC), sometimes called blank-check company, is a shell company that has no operations but plans to go public with the intention of acquiring or merging with a company with the proceeds of the SPAC's initial public offering (IPO). I'm still not entirely clear what the implications are.

Spooky23 6y ago
Sounds like another financial innovation to avoid transparency.
- Jommi 6y ago
  It gets even worse when you talk about reverse mergers. For example the way some chinese companies have become listed in the US is just buying out a penny stock company and listing through that.
- nordsieck 6y ago
  > Sounds like another financial innovation to avoid transparency. I guess it depends on whether you think the financial regulations around IPOs are mostly needless friction or necessary for the public good.
dodobirdlord 6y ago
It seems like the gist of it is that taking a startup public is a pain in the ass on account of regulatory complexity, so you just create a shell company with a charter that says that if it goes public with enough money it will buy your startup in a private transaction. Then you IPO your shell company, which is easy because it has no operations. If it raises enough money you sell your startup to it, and if not you return the money to the shareholders.
kelnos 6y ago
The to-be-acquired (aka to-be-brought-public) company only has to negotiate with a single counter-party -- the SPAC -- so it's less likely the deal will fall through. However, the SPAC is taking on more risk -- they are putting literally all of their money into the acquisition in order to effectively become the acquired company -- so the acquired company will probably have to accept a lower price. Would it be higher than the artificially deflated price in an IPO? Maybe, maybe not. In COVID times, maybe it would be higher. Even if it isn't, the risk of an IPO falling through right now is much higher than usual, so a company wanting to go public might be willing to raise less money in exchange for a higher likelihood of the deal working out.

Spooky23 6y ago

Sounds like another financial innovation to avoid transparency.

Jommi 6y ago
It gets even worse when you talk about reverse mergers. For example the way some chinese companies have become listed in the US is just buying out a penny stock company and listing through that.
nordsieck 6y ago
> Sounds like another financial innovation to avoid transparency. I guess it depends on whether you think the financial regulations around IPOs are mostly needless friction or necessary for the public good.

dodobirdlord 6y ago

It seems like the gist of it is that taking a startup public is a pain in the ass on account of regulatory complexity, so you just create a shell company with a charter that says that if it goes public with enough money it will buy your startup in a private transaction. Then you IPO your shell company, which is easy because it has no operations. If it raises enough money you sell your startup to it, and if not you return the money to the shareholders.

kelnos 6y ago

The to-be-acquired (aka to-be-brought-public) company only has to negotiate with a single counter-party -- the SPAC -- so it's less likely the deal will fall through. However, the SPAC is taking on more risk -- they are putting literally all of their money into the acquisition in order to effectively become the acquired company -- so the acquired company will probably have to accept a lower price. Would it be higher than the artificially deflated price in an IPO? Maybe, maybe not. In COVID times, maybe it would be higher. Even if it isn't, the risk of an IPO falling through right now is much higher than usual, so a company wanting to go public might be willing to raise less money in exchange for a higher likelihood of the deal working out.