Purchase of stock of target not involving a merger with the company Type of transaction and shareholder approved required However, current SPAC provisions do not require a shareholder vote for the transaction to be consummated unless as follows:
Previous SPAC structures required a positive shareholder vote by 80% of the SPAC's public shareholders for the transaction to be consummated. In addition, the target of the acquisition must have a fair market value that is equal to at least 80% of the SPAC's net assets at the time of acquisition. In practice, SPAC sponsors often extend the life of a SPAC by making a contribution to the trust account to entice shareholders to vote in favor of a charter amendment that delays the liquidation date. Otherwise it is forced to dissolve and return the assets in the trust to the public stockholders. A SPAC's trust account can only be used to fund a shareholder-approved business combination or to return capital to public shareholders at a charter extension or business combination approval meeting.Įach SPAC has its own liquidation window within which it must complete a merger or an acquisition. The common share price must be added to the trading price of the warrants to get an accurate picture of the SPAC's performance.īy market convention, 85% to 100% of the proceeds raised in the IPO for the SPAC are held in trust to be used at a later date for the merger or acquisition. In addition, the public currency enhances the position of the SPAC when negotiating a business combination with a potential merger or acquisition target. Trading liquidity of the SPAC's securities provide investors with a flexible exit strategy. Commonly, units are denoted with the letter "u" (for unit) appended to the ticker symbol of SPAC shares. SPACs generally trade as units and/or as separate common shares and warrants on the Nasdaq and New York Stock Exchange (as of 2008) once the public offering has been declared effective by the SEC, distinguishing the SPAC from a blank check company formed under SEC Rule 419. ĭespite the growth in number of SPACs, academic analysis shows the investor returns on SPACs post-merger are almost uniformly negative, although sponsors at the flotation of the SPAC could earn excess returns, and their proliferation usually accelerates around periods of economic bubbles, such as the everything bubble between 20. For this reason they have at times been referred to as the "poor man's private equity funds." The majority of companies pursuing SPACs do so on the Nasdaq or New York Stock Exchange, although alternative exchanges, such as the Euronext Amsterdam, Singapore Exchange and Hong Kong Stock Exchange have also overseen a small volume of SPAC deals. The general public can buy their shares before any merger or acquisition takes place.
In the United States, SPACs are registered with the SEC and considered publicly-traded companies. The opportunities usually have yet to be identified. Securities and Exchange Commission (SEC), SPACs are created specifically to pool funds to finance a merger or acquisition opportunity within a set timeframe. A special purpose acquisition company ( SPAC / s p æ k/), also known as a " blank check company", is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process.