what is special purpose acquisition Company (SPAC) ?
5 Replies
Yogesh Bhatt
(Company Secretary)
(475 Points)
Replied 26 June 2010
A Special-purpose acquisition company (SPAC) is a collective investment scheme that allows public stock market investors to invest in private equity type transactions, particularly leveraged buyouts. SPACs are shell or blank-check companies that have no operations but go public with the intention of merging with or acquiring a company with the proceeds of the SPAC's initial public offering (IPO).
Yogesh Bhatt
(Company Secretary)
(475 Points)
Replied 26 June 2010
A special purpose acquisition company (SPAC) is a corporation formed by private individuals to facilitate investment through an initial public offering (IPO). The proceeds are used to buy one or more existing companies.
Yogesh Bhatt
(Company Secretary)
(475 Points)
Replied 26 June 2010
Special Purpose Acquisition Companies (SPACs) that are also known as “blank check companies” are gradually acquiring prominence in the Indian markets. It is worth briefly examining these entities and their advantages as well as the risks surrounding them.
SPACs are essentially shell entities with no business operations, and which raise funds from the public through an initial public offering (IPO). These funds are raised on the basis that they will be utilised by the SPAC to acquire one or more companies in the future so as to provide returns to their shareholders. The details of the future acquisitions or even the identity of the target entities are not known at the time of the IPO. The investors in the IPO largely rely on the management skills and reputation of the founders of the SPAC while making investments. SPACs are usually committed to a time-frame within which they are required to make acquisitions. In case the committed time elapses without any acquisitions, the investments will have to be returned to the shareholders with certain carrying costs.
SPACs have acquired prominence internationally, especially in the US and in Europe.
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