A Sober Look at SPACs - Michael Ohlrogge

If you follow the financial markets at all in the last year, it's likely you have heard about the newest shiny object on wall street, the SPAC, which is an abbreviation for the term Special Purposes Acquisition Companies. SPACs are a financial instrument for companies to raise capital for equity, having the same end result as a traditional IPOs but with many procedural differences. Essentially the way SPACs work is one company raises money from a set of investors to acquire another company, in exchange for equity in the new resulting merged company once the acquisition is complete. What is important to know going into this conversation is that SPACs were for a long time considered a capital raising tool of last resort, but there has been a significant increase in interest for this financing strategy both on the supply and demand side. In fact in the last year the number of SPACs in progress has exploded, with 248 being initiated in 2020 versus only 59 in 2019, which represents a 32...