Special Purpose Acquisition Company, or a SPAC, is a publicly listed shell company created to merge with a private firm and take it public without the lengthy IPO process. SPACs surged in popularity thanks to their speed, flexibility, and investor access to emerging companies. In this post, we explain how SPACs work, their lifecycle, and why accurate SPAC data is essential for navigating deals and regulatory events, especially for operations teams, analysts, and investors.
What is a SPAC?
SPAC is an acronym for Special Purpose Acquisition Company, which is also known as a “blank check” company. A SPAC is a shell company which intends to find a private company, or target, with which to merge. The SPAC goes public via IPO prior to identifying an acquisition target. Prospective target companies will find the process of going public via Business Combination with a SPAC more attractive than going through the IPO process.
Who needs SPAC Data?
SPACs play a significant role in financial markets, and due to the complexities involved, a wide range of professionals and organizations rely on SPAC data. The processing of SPACs, especially during the investor “election” phases, is not handled by the Central Securities Depository (CSD). This means Operations teams often work directly with the Transfer Agent, creating additional demands for SPAC data. Here’s who needs SPAC data and why:
- Traders & Brokers – To track the performance of SPACs and make informed buy or sell decisions.
- Financial Services Back Office – With the SPAC election phases not processed by the CSD, Operations teams are key recipients of SPAC data. They deal directly with Transfer Agents, making them central to managing the flow of SPAC information.
- Analysts & Researchers – To evaluate the potential of SPACs and their target companies, particularly when making investment recommendations.
- M&A Specialists – Since SPACs are primarily designed for mergers and acquisitions, these experts are critical in structuring and assessing deals.
- Startups – For private companies looking to go public, a SPAC merger may offer a faster and less complicated route compared to a traditional IPO.
- Investment Bankers – They play an essential role in facilitating SPAC deals and structuring financing options.
- SPAC Management Teams – These teams require data to identify the best acquisition targets and manage the IPO process effectively.
- Accounting & Law Firms – To navigate the financial and legal complexities involved in SPAC transactions.
- Private Investors – Anyone looking to invest in SPACs, or those holding shares in one, need data to track performance and potential returns.
Pros and cons of SPACs
SPACs offer an alternative route to public markets that can be attractive to both companies and investors, but they come with trade-offs.
Pros | Cons |
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Faster market entry: Companies can go public in months rather than over a year. | Target uncertainty: Investors commit capital before knowing which company will be acquired. |
Less regulatory friction: The process involves fewer initial disclosures. | Dilution risks: Warrants and founder shares can significantly dilute post-merger equity. |
Access to private opportunities: Retail investors can participate in deals typically reserved for institutional capital. | Variable quality: Not all targets are ready for the public markets. |
Experienced sponsors: Well-known sponsors can provide credibility and strategic guidance. | Performance concerns: Many SPACs have underperformed after completing their mergers. |
SPAC vs. Traditional IPO: What’s the Difference?
Once a company decides to go public, the choice between a SPAC and a traditional IPO becomes a key strategic consideration, and one with direct implications for investors. Although both methods lead to a public listing, they differ significantly in structure, timeline, regulatory approach, and investor exposure.
The table below outlines how these two routes compare across several critical dimensions:
Feature | SPAC | Traditional IPO |
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Time to Market | ~3–6 months | ~12–18 months |
Disclosure Requirements | Lower upfront | Higher |
Investor Access | Pre-merger | Post-merger |
Underwriting Costs | Lower | Higher |
Risk Profile | Higher (uncertain target) | More predictable |
How does the SPAC process work?
The SPAC process is a bit like a treasure hunt, except instead of seeking treasure, the SPAC is on the lookout for a private company to acquire. Here’s a step-by-step look at how it works:
- The SPAC goes public
A SPAC starts by raising capital through an initial public offering (IPO), but without having any business operations of its own. The funds raised during the IPO are placed in a trust account, where they remain until the SPAC finds a suitable target for acquisition. - The search for a target
Once the SPAC is public, it begins the search for a private company to merge with. Some SPACs focus on specific industries or geographic regions, while others are open to a wider range of opportunities. - The acquisition window
SPACs usually have a limited time, typically 24 months, to complete a merger. If they fail to identify and complete an acquisition within this period, the SPAC is liquidated, and the funds in the trust account are returned to shareholders. However, they can extend this window by a few months if needed. - Merging with the Target
If the SPAC finds a private company and both parties agree on terms, they move forward with the merger. Legal and regulatory paperwork is filed to formalize the transaction. - The shareholder vote
Before the merger is finalized, the SPAC’s shareholders vote on the deal. Shareholders can also choose to redeem their shares for a refund if they don’t want to participate in the merger. - A new beginning
Once the deal is approved, the SPAC completes the merger and the new company begins trading under a new name, often the name of the target company or something similar. The combined entity is now a publicly traded company.
What are the stages in the SPAC process?
The SPAC journey consists of several key stages, each marking an important milestone:
- IPO Announced – The SPAC is introduced to the market and sets the stage for its public offering.
- IPO Complete – The SPAC successfully goes public and raises funds, now holding capital in a trust account for the upcoming acquisition.
- Business Combination Announced – The SPAC announces a merger or acquisition deal with a private company.
- Business Combination Complete – The merger is finalized, and the new company starts trading under its new name.
- Liquidation – If no deal is reached within the time frame, the SPAC dissolves, and funds are returned to shareholders.
How can FII help?
Understanding SPACs and navigating their complexities requires access to accurate, up-to-date financial data. That’s where FII comes in. Our Financial Actions Service offers comprehensive SPAC data, helping you track performance, analyze market trends, and evaluate potential investment opportunities. Whether you are a trader, analyst, or investor, having reliable financial information at your fingertips is crucial for making informed decisions in the fast-paced SPAC market.
Here is an example of how FII’s services support investors with real-world SPAC data:
The SPAC IPO stage case study: Social Capital Hedosophia Holdings Corp
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- The SPAC went public under Social Capital Hedosophia Holdings Corp and was listed on the NYSE under the symbol IPOA.U (after initially planning to list on NASDAQ).
- The Units issued during the IPO included Class A Ordinary Shares and Warrants. The number of units issued changed three times, from $400 million (40,000,000 units) to $600 million (60,000,000 units).
- FII’s Role: FII keeps investors up to date with each filing and change, ensuring they are informed of the units being issued and the underlying components (Class A shares & Warrants). FII provides clear details on the warrant terms, including:
- Exercise Price: $11.50
- Exercisable from: 30 days after a business combination (e.g., Virgin Atlantic) or 12 months after the IPO
- Expiry: 5 years, unless redeemed or liquidated earlier.
Case Study: SPAC Merger with Virgin Galactic (SPCE)
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- The merger was announced on July 9, 2019, and involved an Extraordinary General Meeting on September 9, 2019.
- FII helps investors by providing Merger Notifications with full Terms & Conditions, ensuring they understand the process and have the details for voluntary Redemption and the associated market deadline.
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Staying Ahead in the SPAC Market
As SPACs continue to reshape how companies go public, understanding their structure and associated data requirements is critical for the types of groups we’ve described: investors, analysts and operations teams. Every stage introduces unique corporate actions, from IPO to business combination, and each of these stages requires not only accurate tracking but timely insights too.
FII’s Corporate Actions Services offer detailed, up-to-date coverage of SPAC IPOs, unit structures, redemptions, mergers, and liquidations. With comprehensive alerts and documentation, we help operations teams, investors, and analysts track every stage of the SPAC lifecycle with confidence. Learn more about FII’s Corporate Actions Services for accurate SPAC tracking and market event coverage.