A SPAC stock is defined as a “special purpose acquisition company” sometimes called a blank-check company these are stocks with no commercial operations that are formed to raise capital through an IPO for the purpose of acquiring an existing company.
I only recently became aware of SPACs since some popular IPOs happened with companies like Virgin Galactic & Nikola. Most people were not aware they could own these companies before they went public.
SPAC stocks have been a hidden part of the stock market for years, as of currently it’s grabbing the attention of many investors. SPAC stocks offer an opportunity to own companies before they go public, this is attractive to investors for the simple ability to own a company before it’s IPO without being an accredited investor on a public exchange.
How Do SPAC Stocks Work?
SPAC stocks are formed by investors with expertise in a particular industries, for the purpose of pursuing deals. The founders sometime have at least one acquisition target there after, They don’t typically identify there target to avoid disclosures during the IPO. This is another reason there “blank check companies.” IPO investors have no real idea what these companies will ultimately be investing in. SPAC stocks seek underwriters and institutional investors before offering shares to the public.
SPAC stocks raising money in there IPO are not aloud to spend the funds raised except for the purpose of a future acquisition or to be returned to investors. A SPAC stock has two years to complete a deal or face liquidation to return share holder capital. In some cases, some of the interest earned from the trust can be used as the SPAC stocks working capital. After an acquisition, a SPAC stock is typically gets listed on one of the major stock exchanges.
Some Advantages Of SPAC Stocks
SPAC stocks offer a huge advantage to own companies on the assumption of an acquisition. As most investors are not accredited to invest in angel rounds, angel rounds are simply companies raising private capital for an equity stake before going through the IPO process. A famous angel round investment was UBER that even Ashton Kutcher invested in and we know how that worked out for his wallet after it IPO’d!
Holding companies do come with safer prospects to investors just through the fact these SPACs cant spend the money until an acquisition happens or must return share holder capital and close the fund.
If SPAC stocks acquire a company they merge into usually a new ticker symbol well also typically sky rocketing on the news! This is why SPAC investors have become so attracted to the idea to get in before to turn a quick profit!
Recent SPAC Stock Hysteria
SPAC stocks have been exploding thanks to one particular acquisition that happened with NKLA – Niokla Motors, famously tripling investors money in just a month! Now investors have there eyes on new SPAC plays including Hyliion ticker SHLL along with the Golden Nugget ticker LCA. We advise to do your homework and approach these SPAC stocks at your own risk tolerance level as these can be extremely volatile.
SPAC stocks have existed since the 1990s, Banking company GKN Securities, specifically founders David Nussbaum, Roger Gladstone and Robert Gladstone are who developed the template. Since 2003, when SPACs had experienced their last resurgence, SPAC stocks and public offerings have really come up in many different industries such as government contracting markets, consumer goods, energy, construction, financial services, sports & entertainment. The crazy thing about the SPAC stock template is that is popular as well in high growth emerging markets such as China and India.
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