SPACS

Utilizing the SPAC Format for Taking a Company Public 

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This brief note is for educational purposes only. It is not meant to offer professional, financial or legal advice of any kind. It is recommended that you contact competent attorneys, auditors and other professionals prior to considering forming a SPAC.

 

Utilizing the SPAC format to take a company public generally consists of at least four distinct steps:

1. Create the SPAC

2. Identify a “target” company and negotiate terms of a potential deal

3. Approval from SPAC investors and other shareholders

4. Close the deal and take the “target” company public.

 

1. Create the SPAC: Legal counsel and financial advisors are recommended for this phase. It involves incorporating the shell (blank-check) company, and selling founders stakes in that company.  Next, it involves filing relevant forms, such as S-1 and others with the SEC. Finally, it involves raising capital from investors and closing the IPO.

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2. Identify a “target” company after necessary due diligence: Negotiate an agreement with the target company to take it public. This will normally include the percentage to equity given to the SPAC, valuation of target company, etc.

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3. Approval from SPAC investors: Seek approval from SPAC investors and other shareholders to move forward with the acquisition. It approval is not obtained, start searching for another target company.

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4. Close the deal: If approval is obtained from SPAC investors, close the deal with the target company and take it public. In most cases, the newly formed public company takes the name of the target company has a new ticker system.