If you have any plans on using SPAC, then it is clear that you know the advantages of a SPAC. However if you are planning a SPAC there are several things that you should know. Basically, you shouldn’t be a penny stock!
Anyway, before everything we should know what is a SPAC!
What is a SPAC? (Special Purpose Acquisition Company)
A Special Purpose Acquisition Company or a SPAC is a company that raises captal in a way of initial public offering. A SPAC does so through an IPC or initial public offering with the aim of acquiring a selected existing company. There are many advantages of a SPAC which make it a popular solution when it comes to trading.
Benefits of a SPAC
In a recent discussion had with Bloomberg Live, Chinh Chu, CC Capital Partners mentioned one of the biggest advantages of SPACs over IPOs.
Acording to Chinh Chu,
‘’One of the advantages of SPACs over #IPOs – you can go to core investors before the deal and go deeper into the story. That is your market test. With IPOs it’s a 30-minute meet and greet, this is deep and penetrating’’
In SPAC , there is always time limitations. With such time limit, the SPAC team has a target to find liquidity. However in case if they are unsuccessful within the limited period, then the funds collected initially will be returned. Therefore SPACs considered as a cheaper and a quicker way of trading.
Another big advantage of SPAC is that the funds are in escrow. Investors will also earn a small interest for the money in Escrow. With that facility, the risks are minimized.
Overall, a SPAC has different advantages for investors. Basically the target entity of a SPAC maintains most of the advantages.