Special Purpose Acquisition Company
Also called: SPAC, Blank-cheque company · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
A Special Purpose Acquisition Company (SPAC), also called a blank-cheque company, is a shell company. It has no business of its own. It raises money through an IPO for only one purpose: to buy a private company. When the deal is done, the private company becomes listed without going through its own IPO. This is a quicker route to the stock market, but investors do not know in advance which company will be bought.
Example
SPACs are not allowed on India's mainland stock exchanges. They are allowed in the International Financial Services Centre (IFSC) at GIFT City, Gujarat, which works under its own separate rules.
Don't confuse with
- Initial Public Offering (IPO): in a normal IPO, a company with a real business sells its own shares to the public. A SPAC's IPO raises money before the business it will own has even been chosen.
Related concepts
- Primary market
- Initial Public Offering
- Red herring prospectus
- Book building
- Anchor investor
- Qualified Institutional Buyer
- Application Supported by Blocked Amount
- Green shoe option
- Underwriting
- Grey market premium