What Is a SPAC or Special Purpose Acquisition Company and Should You Invest?

Patrick Boyle On Finance

What is a special purpose acquisition company (SPAC)? or blank check company? Should you invest in SPACs, and how do they work? A SPAC is publicly-traded shell companies that raise collective investment funds through an initial public offering (IPO) in the form of a blind pool. The funds are placed into a trust until an acquisition is made or a predetermined period of time elapses and the fund is liquidated. SPACs are increasingly being viewed as an alternative to the IPO process in particular for silicon valley companies since the failed WeWork IPO. Some recent SPAC mergers have been controversial such as Nikola Motors (NKLA) and Luckin Coffee (LKN) and Wirecard. Many argue that these companies would not have made it through the traditional IPO process. We will also learn about Direct Listings, like the Spotify listing which is another alternative to the IPO process.
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