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What is a SPAC? Special Purpose Acquisition Companies Explained

SPACs are shell companies that have no business or assets but are designed to raise money through an IPO
SPACs are shell companies that have no business or assets but are designed to raise money through an IPO

TD Ameritrade

“SPACs, or special purpose acquisition companies, are shell companies that have no business or assets but are designed to raise money through an initial public offering, or IPO, and then later use that money to merge with or acquire a private, operating company.

The raising of money to later buy a company has led to SPACs being called “blank check” companies. SPACs were very popular in the 2020 initial public offering (IPO) markets.

Companies like DraftKings (DKNG), Nikola (NKLA), and Virgin Galactic (SPCE) have made headlines and drawn the attention of investors. So, how do SPACs work, and why are they so popular? And should you be concerned about their shaky reputation? Learn why some investors are looking closer at these companies.”