On January 26, 2021, Paul Bernstein was quoted in Billboard on what special-purpose acquisition vehicles (SPACs) look for when acquiring a private company.
According to the article, private companies like SPACs for going public without the cost, regulations, and scrutiny of a traditional IPO. They allow everyday investors to own equity in high-growth startups that are normally available only to venture capital and private equity firms. That’s because a SPAC is a “blank check” corporation, a shell company that raises money through an IPO and uses the proceeds to buy a private company.
An investor doesn’t know which company will eventually be acquired. Instead, investors back a SPAC based on the experience and expertise of its founders. Lacking a clear ending hasn’t discouraged IPO investors: the number of SPAC IPOs rose from 59 in 2019 to 248 in 2020. Another 76 SPACs have gone public in the first 26 days of January.
Regardless of the target’s industry, a SPAC has one important thing in common with the traditional IPO, says Bernstein. “You look for the same thing in any company that’s going to go public: growth.”
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