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SPAC IPO – a special-purpose acquisition company – whose goal is to find a promising company that would like to go public and then merge with it.
What the process looks like: a group of investors, also called sponsors, creates a SPAC and then raises funds from other investors. SPAC, remaining a company without any assets other than the funds raised, goes for an IPO. Moreover, even if the sponsors initially have an idea of the company they would like to buy, the other investors do not know the purpose of SPAC.
Then SPAC has a period of two years to find a suitable company (most often in the technology sector) that wants to go public and negotiate the terms of the purchase. The acquisition of this or that company and the terms of such acquisition are discussed with the existing shareholders of SPAC, and after the transaction they usually receive not only the relevant share in the new company, but also options to buy some more shares in the future.
If any of the shareholders are not satisfied with the object or the terms of the transaction, they can withdraw from the SPAC and get their money back. If the sponsors are unable to find a suitable company within the deadline set in the calendar, the SPAC shareholders also receive their money back.
The real growth in popularity of SPACs has begun in recent years. This offering option is experiencing a particular boom in 2020: according to Dealogic as of September, there were 47 acquisitions involving SPACs worth $50.2 billion on the 2020 offering calendar – by comparison, last year’s offering calendar saw 22 such deals worth $15.1 billion.
The most high-profile on the offering calendar was last year’s merger of billionaire Richard Branson’s space company Virgin Galactic with SPAC Social Capital Hedosophia. Other recent examples include the merger of fantasy sports platform DraftKings with Diamond Eagle Acquisition, and SPAC’s purchase of electric car maker Nikola by VectoIQ.
The attractiveness of SPAC for the founders of a company to be made public as well as for investors who have invested in it at the pre-IPO stage is, among other things, that a merger with SPAC avoids the long and rather complicated process of an IPO. In the case of SPAC, negotiations are conducted with only one party, without the involvement of brokers, and immediately after the deal is completed, the company receives all the benefits of going public.
This gives SPAC IPO some advantages for the existing shareholders of the company which is about to go public, as compared to a traditional IPO and to a direct placement. On the one hand, after the merger they do not have to wait 90-180 days for the lock-up period to expire as in an IPO, on the other hand they get a clearly specified price for their shares and do not run the risk of the shares falling immediately after the direct placement due to a possible lower demand for them.
Investments in SPAC may also be a convenient option for those who want to invest at the stage of IPO, being a small investor, because in a regular offering they can get access to the purchase of shares only after institutional investors who have already bought shares of the company at a significant discount. In addition, it is often said that this option is more reliable in conditions of high market volatility with the beginning of the COVID-19 pandemic – in this respect SPAC wins over both IPO and direct placement.
AI-TON analysts are constantly searching for offers on the OTC market, analyzing the financial statements, a description of the company's business, future plans, the possibility of a takeover or multiple capitalization growth, as well as the risks that may hinder the development of the business. The best offers we offer our investors
As part of its OTC stock purchase service, AI-TON acquires units of funds holding shares in private companies for its traders and investors. Such funds invest in private companies at an early stage or purchase shares from company employees.
After the IPO procedure, the shares are at the disposal of AI-TON. They can be sold after the agreed lock-up period of six months. Or hedged during this period. Before the IPO, AI-TON looks for an exit on the over-the-counter market. When an optimal offer appears, the shares are sold
After the expiration of the Lock Up period, the investment is automatically closed and the investor receives a profit to the account, minus AI-TON commissions. For investors whose investment amount exceeds $100,000, there is an opportunity for individual search of counterparty in the over-the-counter market and profit before the company's IPO and, as a consequence, before the end of the Lock Up period.
