The hottest thing in finance is four letters long. Former NBA star Shaquille O’Neal has one. Yes and the speaker of the house, Paul Ryan. The same goes for cash hedge fund billionaire William Ackman.
Called SPAC, it is increasingly being the preferred source of funding for private companies wishing to become public. Richard Branson’s space exploration company, Virgin Galactic Holdings Inc., went public through SPAC in 2019, and sports-based company DraftKings Inc. that last year. Nearly 300 SPACs are now seeking contracts, armed with around $ 90 billion in cash. And more are being distributed at an alarming rate – so far this year, five new SPACs have been launched every business day.
“If you don’t have your own SPAC, you don’t have anyone,” said Peter Atwater, founder of research firm Financial Insyghts.
SPACs – which stand for purpose-built construction companies – are largely big money listed on exchanges. Their purpose is to quickly find, buy and publicly acquire a private company. Some on Wall Street call them “blank check companies” because the investors who support the SPAC spent their money months before a construction target was identified, relying on the people who run the show to find a good opportunity.
These contracts are generating a lot of interest as they offer big payday to their creators, making it easier for beginners in hot industries such as electric vehicles to take advantage of scary running. in the stock market and offers a new path to a. hot stock. When an SPAC buys a company, they join it in a kind of accelerated IPO process – called “backward merger” – going beyond the standard scrutiny an IPO receives.