You can buy a private jet, a private island, a football team, a timeshare on Mars… Hell, you can even buy a president if you like. But the true status symbol of the new billionaire class is something more understated, more misunderstood, more mysterious, more, well, bubbly. Your very own blank cheque company. Otherwise known as Special Acquisition Companies (or SPACs), these are the latest highly-gaseous, highly-geared investment tools that have taken your favourite billionaires by storm. But what are they? What do they mean for the rest of us? And how can you get in on the fun?
What is a SPAC?
A SPAC is an investment vehicle that goes public despite not really doing much or owning anything — yet. The plan is to raise lots of cash from keen investors and use it to buy into another company — usually a private company that hasn’t been picked yet. Essentially, the owners of the SPAC say: ‘give us your money (lots, please) and we’ll decide what to do with it later.’
If that seems like a topsy-turvy, back-to-front way of going about things, then fine — that’s because it is. But it’s wildly popular — faddy, even. More than 40% of the IPOs in 2020 by volume have been done in this way, to the tune of some $31.6 billion.
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