August 2, 2021

Spacs are falling short of their promises

Smaller, newer businesses face all sorts of challenges, some new and some age old. There is increased corporate concentration and the near monopoly power of the digital giants. The cost of complying with many regulations is proportionately higher for them and they have less access to cheap public debt markets than their bigger competitors.

This causes many companies to eye the equity markets for funding, but the initial public offering process can be lengthy and expensive. These days, the executives in charge have another choice: merging with a Spac, or “special purpose acquisition company”. Advocates say these listed blank cheque vehicles can offer a smarter, more reliable and faster way into public markets.

But do they? Spacs, which are shell corporations that go public on a promise to turn themselves into real businesses via mergers within two years, have had…

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