3/23/2023 0 Comments Spac transaction![]() They then merge with that target, which allows the target to go public while avoiding the much longer IPO process. SPACs typically use the funds they've raised to acquire an existing, but privately held, company. ![]() The company's cash is held in short-term Treasuries until then, so the initial investment will be safe, but the company's shares might drop under the IPO price in the course of normal market volatility. If the SPAC is unable to make a deal within the predetermined time frame, the SPAC is liquidated. If it does so, it usually will change its ticker to reflect the new entity it has merged with, and shareholders will now be invested in the acquired company. Once it goes public, the SPAC typically has between 18 and 24 months to seek out a "target company" and negotiate a buyout. Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice. But the blank-check company itself is just a pile of cash with no actual business behind it. Investors who pony up that initial sawbuck will see their capital go onto the company books as cash.Īt that point, the SPAC will trade just like any normal shares, with shareholders free to buy and sell like they would any other stock. These units often include a share of common stock, but also a fraction of a warrant allowing investors to buy a common share at some point in the future, typically with an exercise price of $11.50 per share. When a blank-check company does go public, it usually sells "units," almost always at $10.00 per share. A de-SPACing is truly a hybrid of a traditional M&A transaction and a capital markets transaction and requires a legal team like Katten with experience representing portfolio companies, private companies, sellers and SPAC acquirors in every stage of a de-SPACing.SPACs 101: What Is a SPAC, And How Does It Work?Īfter that, the company will then file for and eventually execute an initial public offering (IPO) to raise additional funds from the public markets. The process of a private company combining with a SPAC is referred to as a "de-SPACing" transaction. From due diligence to negotiating the underwriting agreement to closing matters, we work closely with all stakeholders throughout the IPO process to ensure a smooth offering. Our team provides thoughtful and timely information on key legal issues, commercial considerations and compliance issues. ![]() Katten represents investment banks serving as underwriters in SPAC IPOs. We work with investors to focus on key investment terms, including (i) lockup agreements, (ii) registration rights and (iii) governance arrangements. We represent investment funds in the negotiation and execution of these transactions, including forward purchase agreements and private investment in public equity (PIPEs) and the legal, commercial and regulatory implications of these transactions. The rise in SPAC transactions has increased demand for alternative financing arrangements in connection with business combinations.
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