SPAC.
In plain English
A SPAC, or special purpose acquisition company, is a company with no operations that raises cash by going public, purely to hunt for a private business to merge with. The merger takes that private company public without the traditional IPO process, which is why SPACs are sometimes called blank-check companies. They boomed and then cooled sharply, and many SPAC mergers went on to perform poorly for everyday investors, so they are worth treating with caution rather than excitement.
01Why it matters
SPACs are marketed as a fast, exciting way into new companies, but their weak average track record makes understanding what you are actually buying important.
02The math, step by step
A SPAC raises 300 million dollars from investors, then merges with a private electric-car startup a year later. The startup is now publicly traded without having run a traditional IPO.
03What this is NOT
A SPAC is NOT a traditional IPO. In an IPO a real operating company sells its own shares; a SPAC is an empty shell that raises money first and finds a company to merge with later.