Special purpose acquisition companies (SPAC’s) seem to be all the rage in Silicon Valley right now, so it is important to understand them.
Dan Levine of Bloomberg wrote one of the best introductory posts on the topic that explains the mechanics of SPAC’s in plain english
. TLDR: SPAC’s are blank check companies that raise money from investors in a public offering, and merge with a high growth startup, with the result of the company becoming public via this process. This whole process is very expensive where the startup typically pays premium fees + give away a portion of the startup’s equity to the SPAC itself (typically 20%).
If you’re interested in learning more about all of the details of how these work, I highly encourage you to read through the post in its entirety and some of his other articles on the topic as well (linked in the article).
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