WTF is a SPAC?

WTF is a SPAC?

SPACs are in town and they don’t play by no rules. A Special Purpose Acquisition Company, also known as a ‘blank check company’, is an investment vehicle.

SPAC
A lot of you beautiful people, like us, are fortunate enough to work in tech. We know that as a SaaS company, you need to hit a few holy grail metrics to be able to achieve that sweet sweet IPO – $100MM ARR, >30% YoY revenue growth, >120% Net Revenue Retention, etc.  

Well not anymore, because SPACs are in town and they don’t play by no rules. A Special Purpose Acquisition Company, also known as a ‘blank check company’, is an investment vehicle (cha-ching, not brum brum) that raises capital through an IPO with the purpose of acquiring another company and thus taking that company public. None of that making sense? We agree. So here’s how it works:
  1. An investor or ‘sponsor’ group decides they want to create a SPAC
  2. They find underwriters and institutional investors to participate
  3. The SPAC company is taken public under a unique name like LMAO
  4. Public market investors buy shares in the SPAC without knowing who they will acquire, but with the option to get their money back if they don’t like the acquisition target once it is announced
  5. They announce intentions to acquire a company, like Nikola, and Nikola becomes a publicly-traded company and all of the SPAC investors get ownership of the new company.  

If it sounds like this is skipping some vital steps in the testing and diligence process of a company, it’s because it is. It’s the wild west out there partners, watch out!

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