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The hottest thing in finance is four letters. Former NBA star Shaquille O’Neal has one. The same goes for former Speaker of the House Paul Ryan. The same goes for silver-haired hedge fund billionaire William Ackman.
It’s called a SPAC, and it’s increasingly the preferred source of funding for private companies looking to go public. Richard Branson’s space exploration company, Virgin Galactic Holdings Inc., went public through a SPAC in 2019, and sports betting company DraftKings Inc. did so last year. Nearly 300 PSPCs are now seeking deals, armed with around $ 90 billion in cash. And more are being rolled out at a breakneck pace – so far this year, an average of five new PSPCs launched every business day.
“If you don’t have your own PSPC, you are no one,” said Peter Atwater, founder of research firm Financial Insyghts.
PSPCs – which refer to special purpose acquisition companies – are essentially large reserves of listed liquidity. Their goal is to find a private company, buy it and go public quickly. Some on Wall Street call them “blank check companies” because investors backing PSPC invested their money months before an acquisition target was identified, trusting the people running the show to find it. a good deal.
These deals are generating a lot of interest because they generate big payouts for their creators, allow startups in hot industries such as electric vehicles to capitalize on a foamy stock market boom, and offer everyday investors a new path to hot broth. . When a PSPC buys a company, it merges with it in a sort of accelerated IPO process – a so-called “reverse merger” – while bypassing the normal control an IPO receives.
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