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What’s a special purpose acquisition company (SPAC)?



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A special purpose acquisition company (SPAC) is a company that does not have a business. It has no operations, no product and no service.

A SPAC is created by an investor sponsor, typically a person or entity with industry and public company experience. A SPAC raises capital (minimum $30 million) by issuing securities to the public through an IPO.

Unlike a traditional IPO, at the SPAC IPO stage, the company does not have an operating business or assets, other than cash. At this stage, potential investors will be focussing on the experience of the SPAC’s directors or officers, referred to as SPAC founders, to identify a business to be the target of the qualifying acquisition.

The intention is to use them to make a qualifying acquisition of a business or asset identified after the IPO is completed.

A SPAC should be considered a very speculative investment. If you invest, you will not know what company the SPAC may acquire. Although the target business sector is often identified in the IPO. That’s why SPACs are frequently called “blank-cheque companies.”

Learn more about the SPAC listing process and alternative ways a company may go public in Canada.

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