What is a SPAC? Should You Invest in SPACs?


SPACS or special acquisition companies are becoming a popular way to raise money. It is a unique and innovative concept that, on the surface, doesn’t seem to make sense.

This article will answer the question, what is a SPAC, and offer the pros and cons of the method as we see them. Read on to get the knowledge you need to answer the questions when someone asks.

A SPAC is a company that raises money from investors to acquire another company. They are typically listed on an exchange and have a board of directors and management team. Once they raise enough money, they will find a company to buy.

What is a SPAC?

The first Special Purpose Acquisition Company was created in 1993 by Bill Ackman, Pershing Square Capital Management founder. Since then, they have acquired companies such as Hertz Global Holdings Inc., Burger King, and Red Roof Inn.

SPAC History

SPACs have two years to find a target company or return the money to investors (including retail and institutional investors). SPAC investors are betting that management can identify target companies with stock prices undervalued by the market and buy them at a discount (or on the cheap) within this time frame.

How Do They Work?

Once this happens, shareholders from both companies would receive SPAC shares in a new entity created with their combined assets – which means more value for everyone involved if things go according to plan. Because companies have considerable flexibility on their acquisition targets, SPACs are often called “blank check” companies.

– They are easy to access for many investors since you do not need special qualifications like passing through accredited investor status. – There are not any lockup periods where you can’t sell your shares of SPAC stocks right away, unlike with traditional IPO

Pros of Investing in SPAC

They are highly speculative investments since there isn’t much known about their assets after finding another company or business to buy out. That means the market value is unknown, making it harder to determine whether or not they are overpriced and therefore at risk of losing money on the investment.

Cons of Investing in SPAC

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