Page 36 - Banking Finance March 2022

ARTICLE

Elements of SPAC IPO

Y Affiliate means any person that directly or indirectly
controls, is controlled by, or is under common control
with, the issuer.
Y Business combination - De-SPAC transaction that will
combine the SPAC and target business into a single
publicly traded company.
Y Warrant means redeemable warrant which entitles the
holder thereof to purchase one share of a common stock
post business combination.
Evolution of SPAC Y Sponsor is the entity or management that funds the

Y The first SPACs that appeared in 1990's could not qualify SPAC. It is often a new limited liability company formed
for listing on any U.S. exchange and were often quoted solely for the purpose of sponsoring the SPAC. IPO
on the OTC Bulletin Board and were made to comply expenses, underwriting commission, and a minimum
with the onerous rules for "blank check" offerings. amount of working capital will be funded by the sponsor.
Y In 2003, SPAC went public for the first time in US. Typically sponsors own 20% of outstanding common
stock of SPAC post-IPO.
Y In 2005, the American Stock Exchange (NYSE Amex)
began allowing SPACs to list under generic listing Y Trust Account - Account in which the IPO proceeds are
standards that did not require companies to have placed. The funds are not permitted to be released from
operating histories. the trust account until the closing of a business
combination or the redemption of public shares. The
Y In 2008, as the financial crisis reached its peak, the IPO
market for SPACs closed, the number of acquisitions interest generated can be used to pay taxes until
completed by SPACs dropped significantly. business combination.
Y Target Business- The business to be acquired post
Y In 2010 listing rules were altered to remove the
requirement of majority voting to initiate a business closure of offering. Normally the business is chosen from
combination. Instead the investors opposing business a specific industry in which the management or the
combination can redeem their shares. In 2010, private sponsor possesses expertise.
equity firms frequently emerged as sponsors of SPAC. Y Units means units of SPAC consisting of common stock
Y In the next ten years SPAC started gaining momentum. (class A or class B shares) and in most case redeemable
In 2020, $83.36 Bn was raised through SPAC IPOs. warrants.
Y In 2021, till the end of June month, record breaking 362
SPACs have been formed raising in total $ 111.12 Bn. Process of SPAC IPO
Y Founders - A SPAC is formed by experienced business
Summary of SPACs in US since 2003 executives who are confident that their reputation and

experience will help them to identify a profitable
SPACs No. of Amount
company to acquire. Since SPAC is only a shell company,
SPAC involved
in $ Mn the founders become the selling point when the
sourcing funds are from investors. The founders provide
SPACs seeking acquisition 426 1,33,086
the starting capital for the company and they stand to
SPACs announced acquisition 145 43, 627
benefit from a sizeable stake in the acquired company.
SPACs completed acquisition 335 73,952 The founders often hold an interest in a specific industry
SPACs liquidated 90 12,451 when starting a special purpose acquisition company.
Total 996 2,63,117 Y Registration - Filing registration statement (Form S-1)
SPAC IPO in pipeline 286 70,756 with the U.S. Securities and Exchange Commission
Source: SPACs analytics ("SEC"),

36 | 2022 | MARCH | BANKING FINANCE