6 ms·

What is a SPAC?

DreadY2K 4y ago
https://en.wikipedia.org/wiki/Special-purpose_acquisition_company https://en.wikipedia.org/wiki/Special-purpose_acquisition_co...
acover 4y ago
> is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process and the associated regulations thereof. https://en.m.wikipedia.org/wiki/Special-purpose_acquisition_company https://en.m.wikipedia.org/wiki/Special-purpose_acquisition_...
taywrobel 4y ago
Not sure why you’re getting downvoted, this is a primarily tech forum and a SPAC is a primarily business concept. It means a “special purpose acquistion company”. It’s effectively a company set up for the express purpose of facilitating an acquistion or merger of companies, so that assets or IP ownership can be moved in an optimally tax or otherwise cost efficient way. Many have argued they provide no value except for helping wealthy people retain their wealth, hence why you see a lot of folks here lacking sympathy in their collapse.
- robotresearcher 4y ago
  > Not sure why you’re getting downvoted, Likely because you'll get the answer from first Google hit quicker than typing the question in English. Edit: I don’t object to the question. Just stating my guess as to why the downvotes occurred.
  - yreg 4y ago
    Yet it is probably useful for many to have it here. We will see by the votes.
  - kapildev 4y ago
    But once one questions and another answers, the answer would be available right here on Hackernews. Hundreds of people would save time + comprehend better because the answers here would explain in a compact and comprehensive manner and that too from the perspective of a tech-savvy person.
    - EGreg 4y ago
      It’s sad that you’re being downvoted for saying that
      - kapildev 4y ago
        Innocent question: how do I check whether I am being downvoted? Is this something you see only after you cross the 500 karma points? A quick Google search didn't return anything related.
        gumby 4y ago
        other commenters tell you or you can just see your comment text become grey rather than black.
        EGreg 4y ago
        How would other commenters know? :)
        gumby 4y ago
        They see the text as grey.
        s1artibartfast 4y ago
        you can google that too...
    - s1artibartfast 4y ago
      That said, there is value in deprioritizing basic and low effort questions. While these may be helpful for those who do not know, they get in the way of more productive conversation. Nobody should flag such a question, but it isn't particularly interesting or insightful.
  - taywrobel 4y ago
    God forbid we actually talk to people to learn something… Google will give you an expansion of the acronym and a generic business definition, sure. But I think it’s nice to be able to contextually tailor the response to the presumed audience of HN and the assumed expertise of the asker. I get that us engineers are obsessed with efficiency in information sharing, but I do like participating in actually being a human from time to time.
  - quickthrower2 4y ago
    Google? How November
- highwaylights 4y ago
  The other big reason they’ve become so popular lately is that they allow private companies to go public without an IPO (thus avoiding a lot of the disclosures that would otherwise be required). Public SPAC created with no business -> raises funding from investors (or marks) -> “acquires” private company -> SPAC renames to private company’s name -> private company is now public without IPO
  - rodgerd 4y ago
    Yeah, this is the key context: people have argued that they're essentially a way of capturing all the value of a "going public" event to a smaller audience than a traditional IPO.
  - fijiaarone 4y ago
    Yes, the special purpose is to avoid disclosure or regulation. It’s pseudo-legalized fraud.
- ElijahLynn 4y ago
  Thank you, I had no idea and think many others didn't either.
- tomrod 4y ago
  Side question -- where can I learn this space? Until you defined it, I had seen SPAC a handful of times but never know what it was or how it is used.
fastball 4y ago
A SPAC, or Special Purpose Acquisition Company, is a type of investment vehicle that is formed for the purpose of acquiring or merging with another company. SPACs are often used as an alternative to the traditional initial public offering (IPO) process, as they provide a faster and more efficient way for a private company to become publicly traded. SPACs are typically created by a group of investors, who raise money from other investors through an IPO. The investors provide the capital for the SPAC, and the SPAC's managers use that capital to search for a private company to acquire. Once the SPAC finds a target, the two companies merge and the investors in the SPAC receive shares in the newly combined company. People use SPACs for a variety of reasons. For investors, a SPAC can provide an opportunity to invest in a private company without having to go through the traditional IPO process. For the managers of the SPAC, a SPAC can provide a way to raise capital and make a potential return on their investment if the acquisition is successful. For the target company, a SPAC can provide a way to become publicly traded without going through the time and expense of a traditional IPO.
- jfengel 4y ago
  Presumably the SPAC itself must go through some IPO-like process in order to get listed. If it doesn't get listed then its shares aren't liquid. I take it that they are subject to little scrutiny since it's just "we're a company with no business but a ton of capital", and the exchange and SEC say "sounds legit to me". Then they can "take over" the target, again with little scrutiny. Have I got that right?
  - fastball 4y ago
    I mentioned that they IPO in the second paragraph. And yep, that's about right. Detractors claim it avoids filing regulations and that is bad while proponents say that it justifiably avoids direct listing which can be prohibitively time-consuming / expensive.
    - jfengel 4y ago
      Ah, missed that part. Thank you very much.
lizknope 4y ago
I had no idea and after reading the article I still had no idea. I only clicked on it because I misread it as SPARC thinking it was an article about Sun's RISC CPU
HWR_14 4y ago
It's a company that goes public (trades on a stock exchange) with no actual business. It sells new shares (traditionally for $10 each) to investors, creates a pot of money (the size needed determines the number of shares sold) and promises a business model of "acquire [existing thing]". It then has some amount of time to set up the acquisition and get the shareholders to approve it. If it doesn't, the $10/share (plus interest) is returned to them. The thing being acquired gets to go public without needing an IPO. The people who buy the SPAC end up owning shares of the thing.

What is a SPAC?

https://en.wikipedia.org/wiki/Special-purpose_acquisition_company https://en.wikipedia.org/wiki/Special-purpose_acquisition_co...

acover 4y ago

> is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process and the associated regulations thereof. https://en.m.wikipedia.org/wiki/Special-purpose_acquisition_company https://en.m.wikipedia.org/wiki/Special-purpose_acquisition_...

taywrobel 4y ago

Not sure why you’re getting downvoted, this is a primarily tech forum and a SPAC is a primarily business concept. It means a “special purpose acquistion company”. It’s effectively a company set up for the express purpose of facilitating an acquistion or merger of companies, so that assets or IP ownership can be moved in an optimally tax or otherwise cost efficient way. Many have argued they provide no value except for helping wealthy people retain their wealth, hence why you see a lot of folks here lacking sympathy in their collapse.

robotresearcher 4y ago
> Not sure why you’re getting downvoted, Likely because you'll get the answer from first Google hit quicker than typing the question in English. Edit: I don’t object to the question. Just stating my guess as to why the downvotes occurred.
- yreg 4y ago
  Yet it is probably useful for many to have it here. We will see by the votes.
- kapildev 4y ago
  But once one questions and another answers, the answer would be available right here on Hackernews. Hundreds of people would save time + comprehend better because the answers here would explain in a compact and comprehensive manner and that too from the perspective of a tech-savvy person.
  - EGreg 4y ago
    It’s sad that you’re being downvoted for saying that
    - kapildev 4y ago
      Innocent question: how do I check whether I am being downvoted? Is this something you see only after you cross the 500 karma points? A quick Google search didn't return anything related.
      - gumby 4y ago
        other commenters tell you or you can just see your comment text become grey rather than black.
        EGreg 4y ago
        How would other commenters know? :)
        gumby 4y ago
        They see the text as grey.
      - s1artibartfast 4y ago
        you can google that too...
  - s1artibartfast 4y ago
    That said, there is value in deprioritizing basic and low effort questions. While these may be helpful for those who do not know, they get in the way of more productive conversation. Nobody should flag such a question, but it isn't particularly interesting or insightful.
- taywrobel 4y ago
  God forbid we actually talk to people to learn something… Google will give you an expansion of the acronym and a generic business definition, sure. But I think it’s nice to be able to contextually tailor the response to the presumed audience of HN and the assumed expertise of the asker. I get that us engineers are obsessed with efficiency in information sharing, but I do like participating in actually being a human from time to time.
- quickthrower2 4y ago
  Google? How November
highwaylights 4y ago
The other big reason they’ve become so popular lately is that they allow private companies to go public without an IPO (thus avoiding a lot of the disclosures that would otherwise be required). Public SPAC created with no business -> raises funding from investors (or marks) -> “acquires” private company -> SPAC renames to private company’s name -> private company is now public without IPO
- rodgerd 4y ago
  Yeah, this is the key context: people have argued that they're essentially a way of capturing all the value of a "going public" event to a smaller audience than a traditional IPO.
- fijiaarone 4y ago
  Yes, the special purpose is to avoid disclosure or regulation. It’s pseudo-legalized fraud.
ElijahLynn 4y ago
Thank you, I had no idea and think many others didn't either.
tomrod 4y ago
Side question -- where can I learn this space? Until you defined it, I had seen SPAC a handful of times but never know what it was or how it is used.

fastball 4y ago

A SPAC, or Special Purpose Acquisition Company, is a type of investment vehicle that is formed for the purpose of acquiring or merging with another company. SPACs are often used as an alternative to the traditional initial public offering (IPO) process, as they provide a faster and more efficient way for a private company to become publicly traded. SPACs are typically created by a group of investors, who raise money from other investors through an IPO. The investors provide the capital for the SPAC, and the SPAC's managers use that capital to search for a private company to acquire. Once the SPAC finds a target, the two companies merge and the investors in the SPAC receive shares in the newly combined company. People use SPACs for a variety of reasons. For investors, a SPAC can provide an opportunity to invest in a private company without having to go through the traditional IPO process. For the managers of the SPAC, a SPAC can provide a way to raise capital and make a potential return on their investment if the acquisition is successful. For the target company, a SPAC can provide a way to become publicly traded without going through the time and expense of a traditional IPO.

jfengel 4y ago
Presumably the SPAC itself must go through some IPO-like process in order to get listed. If it doesn't get listed then its shares aren't liquid. I take it that they are subject to little scrutiny since it's just "we're a company with no business but a ton of capital", and the exchange and SEC say "sounds legit to me". Then they can "take over" the target, again with little scrutiny. Have I got that right?
- fastball 4y ago
  I mentioned that they IPO in the second paragraph. And yep, that's about right. Detractors claim it avoids filing regulations and that is bad while proponents say that it justifiably avoids direct listing which can be prohibitively time-consuming / expensive.
  - jfengel 4y ago
    Ah, missed that part. Thank you very much.

lizknope 4y ago

I had no idea and after reading the article I still had no idea. I only clicked on it because I misread it as SPARC thinking it was an article about Sun's RISC CPU

HWR_14 4y ago

It's a company that goes public (trades on a stock exchange) with no actual business. It sells new shares (traditionally for $10 each) to investors, creates a pot of money (the size needed determines the number of shares sold) and promises a business model of "acquire [existing thing]". It then has some amount of time to set up the acquisition and get the shareholders to approve it. If it doesn't, the $10/share (plus interest) is returned to them. The thing being acquired gets to go public without needing an IPO. The people who buy the SPAC end up owning shares of the thing.