The hottest thing in finance is four letters long. One by former NBA star Shakeel O’Neill. So does former House Speaker Paul Ryan. The same goes for silver-haired hedge-fund billionaire William Ekman.
It is called SPAC, and increasingly it is the preferred source of financing for private companies, which are publicly watching. Richard Branson’s space-exploration firm Virgin Galactic Holdings Inc. went public through an SPAC in 2019, and sports-wagering firm DraftKings Inc. did so last year. About 300 SPACs are now seeking the deal, with approximately $ 90 billion in cash. More are following at a raging clip – so far this year, an average of five new SPACs have been launched each business day.
“If you don’t have your own SPAC, then you are nonexistent,” said Peter Atwater, founder of research firm Financial Insights.
SPACs — which stand for special-purpose acquisition companies — are essentially large pools of cash listed on an exchange. Their aim is to find a private company, buy it and make it public quickly. Some on Wall Street call them “blank-check companies” because investors who supported SPAC put their money in months before identifying an acquisition target, relying on people running the show to find a good deal .
These deals are generating a lot of interest as they produce big days for their creators, making it easy for startups in hot industries such as electric vehicles to capitalize on a fierce runoff in the stock market and everyday investors. Hot stock offering a new path. When a SPAC buys a firm, it merges with it in a sort of accelerated IPO process — a so-called “reverse merger” —so the IPO that receives the general investigation.