What is a SPAC?
How Do They Work?
SPACs have two years to find a target company or return the money to investors (including retail and institutional investors). SPAC investors are betting that management can identify target companies with stock prices undervalued by the market and buy them at a discount (or on the cheap) within this time frame.
4. ‘One Examples of Some Well-Known SPACs
Albertsons Companies, Inc. (ABS) is an American supermarket chain formed in 2006 by the merger of Albertsons and Safeway. It became a publicly-traded company on July 26, 2006. In 2019, private equity firm Cerberus Capital Management acquired ABS for $68 billion
The company raises money from investors by selling shares in an initial public offering (IPO). The company then uses the capital to acquire another business, which becomes its operating subsidiary. Then the subsidiary is listed on a stock exchange.
SPAC Management Structure
One of the critical things for investors to look at when investing in a SPAC is the management structure. That is because the acquired company will have its management team, which will be responsible for running the business and reporting to the board of directors at the SPAC.