Explainer
SPAC
Special Purpose Acquisition Company
A shell company that raises money first, then merges with a private business to take it public.
A SPAC is created with one purpose: to merge with a private company. It lists on an exchange as an empty shell, raises cash from public investors, and then has a limited time, usually about two years, to find a target.
When a deal is announced, the target company effectively becomes public by combining with the SPAC. Investors can usually choose to redeem their shares for their money back instead of staying in the merged company.
SPACs can be faster than a traditional IPO, and the price is negotiated privately. Critics point to sponsor incentives and the dilution they can create for ordinary shareholders.
Illustrative explainers. Figures in examples are hypothetical.