What is a SPAC?

SPACS or special acquisition companies are becoming a popular way to raise money. It is a unique and innovative concept that, on the surface, doesn’t seem to make sense.  

This story will answer the question, "what is a SPAC?", and offer the pros and cons of the method as we see them.  Let's Get Started!

A SPAC is a company that raises money from investors to acquire another company. They are typically listed on an exchange and have a board of directors and management team.

What is a SPAC?

The first Special Purpose Acquisition Company was created in 1993 by Bill Ackman, Pershing Square Capital Management founder. Since then, they have acquired companies such as Hertz Global Holdings Inc., Burger King, and Red Roof Inn.

The First SPAC

SPACs have two years to find a target company or return the money to investors. SPAC investors are betting that management can identify target companies with stock prices undervalued by the market and buy them at a discount (or on the cheap) within this time frame.

How Does it Work?

There are many advantages to investing in a SPAC. They are easy to access, no lock up periods, and there's the potential to find undervalued companies

Pros of Investing in a SPAC

An SPAC has disadvantages as well. They are highly speculative, and there is a lot of risk involved.

Cons of Investing in a SPAC