![]() Trust account: A significant portion of the capital (90 percent or more) raised through the IPO process is then placed in a trust account that earns interest during the SPAC searching/combination period.Public warrants, sponsor warrants, or both, could be subject to formula redemption for cash or stock to clean up a public company cap table. Sponsor warrants can generally be net-exercised (public warrants generally cannot) and may be redeemable for cash or shares on a formula basis. Warrants: Sponsor warrants and public warrants (i.e., warrants from units) have largely the same terms and cannot be exercised until after the completion of the business combination transaction with an operating company.Common stock will typically trade within a narrow band around $10 during the period prior to announcing or completing an acquisition. Generally, units are priced at $10 in IPO and warrants have a strike price of $11.50. ![]() Units, common stock and warrants are all publicly traded, and investors can unbundle their units to trade stock and warrants separately. Units: IPO investors receive “units” typically consisting of one share of common stock and a portion of a warrant (e.g., 1/2 or 1/3 a warrant).Founder shares are usually structured with anti-dilution protections designed to ensure that such shares convert into at least 20 percent of the post-IPO and pre-business combination companies. Founder shares: Sponsors purchase initial equity, often referred to as Founder Shares or Promote, for nominal value and purchase additional warrants to help fund startup costs and commissions.The following is the typical structure of a SPAC: These shell companies are initially formed by a group of investors or “sponsors.” ![]() SPACs are formed strictly to raise a blind pool of cash through an IPO with the objective of acquiring or merging with privately operating companies. What do you need to know about SPACs in order to decide if it is the right fit for you as a private company seeking access to the public markets or as investors looking for an exit strategy or an investment opportunity? The Fenwick & West team worked up some FAQs to consider. Although some signs are starting to point to a possible leveling in months to come, companies that want to create liquidity or go public continue to consider a SPAC transaction as a strategic alternative to a traditional IPO or direct listing. The growing deal volume and value of SPACs across industries from technology to health care to space tourism, coupled with a list of high-profile transactions, such as those completed by DraftKings and by Virgin Galactic Holdings, have spurred unprecedented interest among investors and targets alike. 30, 2020, SPACs raised more than $64.35 billion in 203 IPOs, more than five times the amount SPACs raised-$12 billion in 38 listings-in all of 2019, also a record year. The latest numbers from DealPointData back the claim. ![]() Earlier this year, capital market experts declared 2020 a banner year for SPACs. SPACs, shorthand for special purpose acquisition companies, have become this year’s most popular alternative option for private companies to access the public capital markets and become publicly traded. ![]()
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