Only 68 SPACs have gone public in the first half of 2022, raising $12 billion. While popular last year - there were 362 SPAC IPOs in 2021, raising $107 billion, according to law firm White and Case - they have dropped dramatically in 2022. Once public, the SPAC now has assets in the form of cash raised from investors. With no operations, income or profit, a SPAC, known as the sponsor, raises capital in an IPO with the single intent of acquiring an existing company, otherwise known as a target company. The two are separate but recently have been commingled as a joint strategy that satisfies the needs of both investors and issuers.Ī special purpose acquisition company (SPAC) is a newly formed company with no commercial operations, otherwise known as a shell corporation. These two strategies include the SPACs (special purpose acquisition companies) and PIPEs (private investments in public equities).
Alternative strategies to raise funds from accredited institutional investors have been available for decades but recently have become more popular, given the appetite for issuers to raise funds quickly and cost-effectively - and for investors to move quickly and take ownership of companies with growth potential. Traditional IPOs and stock issues can take a long time for the issuing company to receive funds from investors.
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