The Spectacular Rise of the Blank Cheque Companies (the SPAC)

Posted by Zachary Crockett the HUSTLE

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Special purpose acquisition companies — or “blank check companies” — are suddenly all the rage on Wall Street. What’s the deal?

TL;DR: A SPAC is a publicly traded shell company set up specifically to merge with, and take public, a private company. In the past year, we’ve seen a massive spike in SPACs as an alternative to traditional IPOs, but questions remain about whether they’re a good investment for the public.

What do these 5 people have in common?

  1. Shaquille O’Neal (7’1” NBA legend)
  2. Scott Kelly (former astronaut)
  3. Paul Ryan (ex-congressman)
  4. Serena Williams (one of history’s greatest tennis stars)
  5. Bill Ackman (hedge fund billionaire)

Answer: They all have a hand in SPACs (special purpose acquisition companies), one of the hottest financial trends on Wall Street.

In the past 15 months, SPACs have seen a meteoric rise as an alternative way to take a private company public — one that bypasses many of the legal and regulatory “headaches” of the traditional IPO (initial public offering) process.

By the latest tally, SPACs now outnumber traditional IPOs by a factor of 5x.

Many outlets have proclaimed SPACs to be the “new IPO” — and with good reason:

  • In 2020, 248 SPACs went public (a 400%+ increase from 2019), collectively raising $83B from investors.
  • Just 3 months into 2021, we’ve already surpassed last year’s figures (275+ SPACs, $84B+).

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