The name “Special Purpose Acquisition Company” or “SPAC” has been around since the 1990s but only recently have these blank-check companies become popular enough to draw significant attention from investors and the Securities and Exchange Commission (“SEC”). (Holmes, Forbes). According to the SEC, a SPAC is a company with no operations that goes public for the sole purpose of acquiring a private company—effectively bringing the private company public. (Division of Corporate Finance Staff, SEC). SPACs offer an alternative to the traditional Initial Public Offering (“IPO”) route for taking a company public. (Frank Holmes, Forbes). While this alternative has its advantages, the SEC has begun taking action as it relates to SPACs and applicable disclosures. . .
Read MoreIn 2020, investors looked to make a quick buck using novel investment schemes such as driving up the price of “meme-mania” stocks using social media. (Russell Investments, Seeking Alpha). One of the most popular get-rich-quick schemes in 2020 was to invest in special purpose acquisition companies (“SPACs”). Id. SPACs are “blank check” public companies established to use investors’ capital to find and purchase private companies—a process known as a reverse merger—which private companies then become publicly traded. (Scott Deveau, Bloomberg Law; David Stein, Money for the Rest of Us). By May 2021, initial public offerings (individually, an “IPO”) of SPACs raised $100 billion in capital, already matching the total capital raised for SPACs in 2020 and setting a record for capital raised in SPACs in a single year, with over six months remaining in calendar 2021. (Russell Investments, Seeking Alpha; Emily Graffeo, Business Insider). . .
Read MoreSPAC (pronounced “spack”) is a unique type of company that offers radical, but possibly ill-advised, investment opportunities. (John Hyatt, Nasdaq). The letters in the SPAC acronym stand for “special purpose acquisition company.” (Anna-Louise Jackson and Benjamin Curry, Forbes). Many SPACs are also referred to as “blank check” companies. Id. This secondary name “blank check” is fitting given the purpose of a SPAC, which is to operate as a publicly traded company and to raise money despite providing no product or service. . .
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