SITUATION:
A shell company that has no operations called a SPAC or Special Purpose Acquisition Company is
raising capital to invest in Nikola Trucks, Fisker Auto, and other startup transportation.
SIGNIFICANCE: What’s a SPAC?
SPACs are hot right now.
SPAC stands for “Special Purpose Acquisition Company”,
SPACs are shell companies with no operations that allow retail investors.
Companies Invest in a private equity type transaction.
The investment Is in Shell company that IPOs then raise capital –
Shell then buys another private company with real operations.
How does a SPAC Operate?
The SPAC is usually led by an experienced management team .
Composed of 3 members with private equity, M&A operating experience.
Management team of the SPAC typically receives 20% of the equity
How Does SPAC Work?
SPAC offerings are normally sold in $10 units of one common share.
This is along with an out-of-the-money warrant.
Common share price added to the trading price of the warrant.
Give an accurate picture of the SPAC’s performance.
SPAC’s trust accounts can only be accessed.
To fund a shareholder-approved business combination, or to return capital.
Each SPAC has its own liquidation window to complete a merger or acquisition
SOLUTION(S).
Company is set up to be acquired by a SPAC.
The SPAC can also offer business owners a faster IPO process.
SPACs are sometimes called blank-check company.
Formed as a shell company that has no operations but plans to go public.
Being used by Leading bidder for electric car & truck companies.
Fisker, Lordstown Motors, Nikola, & Hylion are examples in automotive sector.
STATS:
Spartan Energy Acquisition Corp (SPAQ) went from $10 to $16.70 in one week.)
Between 85% to 100% of the IPO proceeds raised are held in trust.
Used at a later date for the merger or acquisition.
Fisker plans to deliver vehicles in 2022 under new company.
SOURCE:
From Robert F. Culberson’s Barron’s Enewsletter Posting – July 12 Issue
RF’s Financial News rfc@culbertsons.com
Blog http://rfcfinancialnews.blogspot.com
http://rfcfinancialnews.blogspot.com>
