Special purpose acquisition
Good morning everyone, today we group 7 comprising of me, Ananya Singh, Aishwarya, Anushka,
Sneha, Aditi, and manthan is going to present on the topic of special purpose acquisition
In this presentation we will be talking about the introduction of spac, its characteristics, its working
mechanism, how can it benefit investors and entrepreneurs, Indian company and foreign spac,
regulatory hurdles of listing spac in India, drawback of spac, and conclusion.
To start with the introduction part,
Special purpose acquisition companies (SPACs) have become a preferred way for many experienced
management teams and sponsors to take companies public. It aim to provide private companies and
start-ups with innovative and novel capital-raising opportunities without having to adhere to legal
formalities and complexities to go public. The term SPACs is defined under Reg. 2 (s) of the IFSCA
(IALS) Regulations, 2021. A special-purpose acquisition company SPAC, also known as a "blank
check company", is a shell corporation listed on a stock exchange with the purpose of acquiring (or
merging with) a private company, thus making the private company public. Its called blank cheque
company since they are formed without a specific target in mind. Once the target company is
identified and the SPAC’s shareholders provide their assent, the SPAC and the target company merge
into a public listed entity. A special purpose acquisition company (SPAC) is a company that has no
actual business operations but goes through an initial public offering (IPO) to raise capital. The SPAC
then purchases or merges with a private company. Because the SPAC is a public company (listed on a
public stock exchange), the private company it acquires becomes public through the purchase.
As defined by the US Securities and Exchange Commission, a SPAC is a company with no operations
that offers securities for cash and places substantially all the offering proceeds into a trust or escrow
account for future use in the acquisition of one or more private operating companies. Following its
initial public offering (IPO), the SPAC will seek to identify acquisition candidates and attempt to
complete one or more business combination transactions, after which the company will continue the
operations of the acquired company or companies as a public company.
CHARACTERISTICS
Key characteristics include:
No Operations: SPACs have no commercial activities before the IPO.
IPO: They raise capital by selling shares to investors, with funds held in a trust account.
SPACs are more flexible in structuring agreement terms and the lock-in periods are usually
avoided
Acquisition Deadline: They have a set timeframe (typically 18-24 months) to find and
complete a merger or acquisition.
Management: Led by sponsors or experienced investors who identify and negotiate deals.
Redemption Rights: Investors can redeem shares if they do not approve of the acquisition.
Post-Acquisition: The private company becomes publicly traded, and the SPAC’s name is
often changed to that of the acquired company.
SPACs offer a faster route for private companies to go public and provide investors with early access
to potentially high-growth companies.
