SPACS or Special Purpose Acquisition Companies, have been the rage in recent years (despite the fact, they aren’t new).
The attractiveness of SPACS has to do with:
- An alternative (and simpler) way of taking a company public
- Makes it easier to raise capital
- Allows retail investors to buy the company’s IPO
One of my favourite financial commenters, Grit Capital, takes a look at the question “Who makes money from SPACS?” – the answer might surprise you:
- Grit Capital has found that retail investors get the short-end of the stick, as recent SPACS have immediately fallen after the IPO
- The one who make the money in the deal is the “sponsor”. The “sponsor” manages the SPAC and invests very little capital but gets 20% of the SPAC equity.
So, it doesn’t really pay to be a retail SPAC investor, it’s the “sponsor” of the SPAC that gets the most benefit.
If you have a team that wants to know the ins and outs of SPACS, reach out to us for one of our Instructors to deconstruct & explain SPACS to your team (available via virtual/online delivery).
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