Although special-purpose acquisition companies (SPACs) have been used for decades as alternative investment vehicles, they have recently come into vogue as seasoned investors and management teams have turned to SPACs to mitigate the increased market volatility risk of traditional initial public offerings (IPOs). In fact, 2020 has been a record-breaking year for SPAC IPOs; the proceeds raised in the first eight months of the year have already more than doubled those raised in 2019. This surge has been driven by the influx of high-profile investors and management teams entering the SPAC space, coupled with an abundance of uninvested capital that had largely been sitting out in the first half of 2020.
A SPAC is a newly created company that uses a combination of IPO proceeds and additional financing (PIPEs have been common in recent times) to fund the acquisition of a private operating company. The proceeds raised in the IPO are placed in a trust account while the SPAC’s management team seeks to complete an acquisition of an existing operating company (“target”), generally in a specific industry or geography, within the period stated in the SPAC’s governing documents (typically, 18 to 24 months). If the SPAC successfully completes an acquisition, the private operating company target succeeds in the SPAC’s public filing status and, as a result, the target effectively becomes a public company.
If the SPAC is unable to complete an acquisition in the allotted timeframe, the cash held in its trust account is returned to its investors unless the SPAC extends its timeline via a proxy process. Capital Biz Solutions has recently partnered with a firm that has access to SPAC financing. We are excited to offer this type of sophisticated level of financing. For companies that are generating between 100M to 1B in top-line revenue and are entertaining going public, we can assist in a SPAC financing vehicle. Please visit us on the web at https://www.capitalbizsolutions.com or simply call us at 508 864 7758. We look forward to assisting you with your new SPAC Funding Vehicle.
