Hey Gotraders,
Happy Monday! The US stock market is closed today because of Memorial Day. We will be back in your inbox with market updates tomorrow. Meanwhile, letâs deep-dive and take a look at SPACs today.
You may have heard the word âSPACâ being used a lot recently, but do you know what a SPAC is? đ¤ˇ
SPAC stands for Special Purpose Acquisition Company. SPACs are usually referred to as âblank cheque companies.â The main purpose of a SPAC is to raise money in an initial public offering (IPO). The SPAC will use the money it raised to merge with a private company and take it public.
Is there a timeframe for the SPAC to take the private company public? â˛ď¸
Money raised by the SPAC in an IPO can only be used to complete the merger with the private company, and this is usually done within a two-year timeframe. If the merger with the private company doesnât happen within the two years, the money would need to be returned to investors.
Why do some private companies prefer to go public via a SPAC? đ¤
There are several reasons why a private company may prefer to merge with a SPAC. The first main reason is the time taken to go public. Traditional IPOs can take up to 2-3 years to finalize, but SPACs are typically completed in 2-3 months. Also, a SPAC deal can add up to 20% to the sale price compared to a typical private equity deal.
Do you have any SPACs on Gotrade? đĽ
We have several SPACs on Gotrade. One of the most high-profile SPACs you may be familiar with is Virgin Galactic (SPCE). Venture capitalist Chamath Palihapitiya's SPAC Social Capital Hedosophia Holdings bought a 49% stake in Virgin Galactic for $800 million before listing the company in 2019. Another high-profile SPAC is Grab (AGC) who recently went public by merging with Altimeter Growth.
Other SPACs on Gotrade include Bridgetown (BTWN), Bridgetown 2 (BTNB), Nikola (NKLA), Provident Acquisition (PAQCU), and Altimeter Growth 2 (AGCB).
Thatâs all from us for now.Â
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