SPACs – Investing in Acquisitions,
IPO Capital Raising

Going public on NASDAQ or NYSE, raising capital for acquisitions, participating in gains

SPACs – Investing in Acquisitions, IPO Capital Raising

SPACs – For Investing in Acquisitions, or IPO Capital Raising

The setup phase of a SPAC provides remarkable profit perspectives for smaller investors (called “SPAC sponsors”, investment approx. US$ 5 to 15 million and more, depending on the IPO target amount), often ranging at an annual level of 25% during the first two years.

Please click the below image to view our SPAC presentation.

Read also: Why SPACs hit record in 2019 with 59 IPOs

What is a SPAC?

A Special Purpose Acquisition Company (SPAC) is a company for the purpose of raising so-called blind pool capital from the market through an IPO, aiming to acquire operating businesses, assets, intellectual property and/or technology, generally within a max. period of 24 months.

Typically, SPACs aim at raising US$100 – 500 million and more, usually from constitutional investors such as pension funds etc. The capital raising goal of a SPAC depends on the specific investment strategy and goals, often defined for a specific industry, technology, or company/ies to be acquired.

Other than the investment strategy and goals, a well selected team of well-known and proven managers of a SPAC are an important factor of motivation for investors during the IPO.

Most IPOs of SPACs are listed on either NASDAQ or NYSE, where 59 SPACs were listed during 2019, raising a total capital of US$ 13,6 billion. 15 SPACs were listed during 2018 at the London Stock Exchange, raising a total of US$2,15 billion.

One of the reasons for the higher popularity of SPACs in the US is the better legal protection of investors, who do not pay their investments to the SPAC, but to an escrow account, from where the eventual acquisitions will be financed. Managers of a SPAC are not allowed to receive salaries or remunerations until the capital raised during the IPO has been invested as per the SPAC’s pre-defined strategy.

By realising planned acquisitions, the SPAC becomes a holding, holding the acquired assets.

Typical (simplified) setup stages of a Special Purpose Acquisition Company (SPAC):

  1. A group of experienced experts develops the (post-IPO) investment concept for a SPAC and secures the participation of well-known experienced managers with proven track records, often industry veterans, private equity sponsors or other experts from the finance industry, who will leverage their expertise to raise capital to acquire and then to operate, a new public company (the SPAC).

  2. One or more sponsors are willing to sponsor the Special Purpose Acquisition Company until its IPO. Generally, SPACs can raise capital during the IPO of up to 20 times of the initial funds provided by the sponsor(s). If the (post-IPO) investment concept of a SPAC requires, for example, US$ 250 million for pre-defined acquisitions, the total engagement of the sponsor(s) must not be less than US$ 12,5 million.Sponsors may participate as individuals or with their own companies. Furthermore, a group of sponsors may be bundled under the umbrella of a Registered Alternative Investment Fund with a Limited Number of Persons (RAIFLNP), and thus act collectively.

  3. In return for his initial financing of a SPAC, the sponsor typically will receive around 20% of the SPAC’s shares, which will substantially raise in value after the IPO.Sponsors’ funds are paid to an escrow account held for the SPAC. Should the SPAC’s IPO fail, sponsors’ funds will be paid back.

    In addition to the initial funding of a SPAC, sponsors bear the setup and running cost of a SPAC, until its IPO. This amount is typically around US$ 750 to 800 thousand. In case the IPO of a Special Purpose Acquisition Company fails, the setup and running cost are not refundable and thus lost.

  4. Once the sponsor(s) have committed themselves and made their payments (in four consecutive stages during the setup and running of the SPAC until its IPO), the Special Purpose Acquisition Company will get listed for the IPO.Financial advising, listing and IPO are carried out by specialised banks in the US. The by-far most successful specialised bank is I-Bankers Securities Incorporated in New York, which participated in 47% of all US SPACs in both 2018 and 2017 and successfully acted as underwriter of 100 SPAC IPOs in total.

  5. After the envisaged capital has been raised during the IPO, a SPAC has normally up to 24 months to acquire operation businesses, assets, intellectual property and/or technology, as per its pre-defined acquisition goals.

SPACs Insider Knowledge:

Further reading:

For more information, please see our SPAC presentation:

Brief SPAC introduction of SPACs (new, Feb 2020)
“What is a SPAC?  What are the advantages of SPACs?   What do we do and why people prefer us!

Our SPACs currently in the making, available for Sponsor participation, updated February 2020:

What we can do for you

Your SPAC idea and concept

Shanda Consult and its partner network can advise you on the business structuring of a SPAC and to introduce you and your SPAC idea and concept to the right parties, including I-Bankers Securities Incorporated in New York as financial advisors and underwriters for the eventual IPO.

Interested to setup up a SPAC or to invest as a sponsor?

Should you be interested in getting involved as a sponsor of an SPAC, we will be happy to present you “ready-made” SPAC concepts from various industries, which top-class management teams ready and post-IPO investment strategy and specific goals defined.

Should you be interested in what we can do for you in relation to SPACs, please contact us through our form below, or call us on +357 222 72 300. 

Important note:
Shanda Consult is not offering and/or providing investment advisory services in the sense of regulated investment advisory services as per respective EU Directives and their implementation into national law of EU Member States. Instead, Shanda Consult offers SPAC Project Management services and consults regarding the general principles of US SPACs and their business structuring. Any investment, legal and financial advice that may become necessary for possible sponsors and investors at advanced stages will be provided by the network partners of Shanda Consult.


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