Introduction to Special Purpose Acquisition Company

By Bridge Point Capital | Jul 15th, 2019


A Special Purpose Acquisition Company (SPAC) is a type of investment fund that allows public stock market investors to invest in private equity type transactions, particularly leveraged buyouts. SPACs are shell or blank-check companies that have no operations but go public with the intention of merging with or acquiring a company with the proceeds of the SPAC’s Initial Public Offering (IPO). SPAC offers an alternative conduit in assisting private companies to go public with an expedited approval process, while at the same time reducing expenses as compared to traditional IPOs and other unconventional capital-raising channels such as back-door listing or reverse mergers.

The SPAC Resurgence

Due to its unmatched flexibility, SPACs have seen resurgent interest since 2014, especially among institutional investors such as hedge funds and investment banks. While total capital raised by SPAC vehicles surged to USD10.8bn in 2018, multiples of the USD1.8bn sourced in 2014, total number of SPACs in the United States also increased to 46 in 2018, up from a mere 12 in 2014.[1]