SPACs (Special Purpose Acquisition Companies)

A SPAC, or Special Purpose Acquisition Company, is a company formed specifically to raise funds through an initial public offering (IPO) with the purpose of acquiring or merging with an existing private company. Essentially, it’s a “shell” company that doesn’t have operations of its own but is created to find and take over a target company, allowing the target to become publicly traded without going through a traditional IPO process. Investors buy shares in the SPAC, betting that the management will successfully identify a promising company to merge with. If successful, the private company gains access to public markets more quickly.