With the onset of the pandemic, special purpose acquisition companies (SPACs) regained popularity as a potentially less costly way to go public and an enticing alternative to an initial public offering (IPO).
Many companies, particularly in high-growth industries, have been eyeing SPAC acquisitions as a possible route to an influx of cash. However, going public through a SPAC comes with its own considerations. The rushed timeline for SPACs to identify a target and close an acquisition, typically within two years, combined with the ultimate reporting requirements of the new public entity, can result in an uphill battle not foreseen at the start of the process.
Those evaluating a SPAC investment should be familiar with the following risks of this remerging trend.