SPAC (Special Purpose Acquisition Company)
A publicly traded shell company that raises capital to merge with a private company, taking it public without a traditional IPO.
A SPAC is a blank-check company that IPOs first, raising capital into a trust with no operating business of its own, then has a set window (commonly 18-24 months) to find and merge with a private target company. The merger — called a de-SPAC — effectively takes the target company public, bypassing the traditional IPO roadshow and underwriting process.
SPACs surged in popularity in 2020-2021 as an alternative path to going public, particularly for companies with forward-looking projections that would be restricted in a traditional IPO prospectus, but the market cooled sharply afterward following weak post-merger performance across many de-SPAC deals and increased SEC scrutiny of the structure.
Evaluate a SPAC merger primarily on the quality and reputation of the sponsor and the actual redemption rate of trust capital at the vote — many SPAC deals in the 2021-2022 cycle collapsed in practice because most trust investors redeemed their shares for cash rather than staying in through the merger, leaving the target with far less capital than the headline deal size suggested.
Is going public via SPAC faster than a traditional IPO?
The merger process itself can move faster than a traditional IPO timeline, but SPAC deals still require SEC review and shareholder approval, and the sourcing/negotiation of a target can take many months — 'faster' isn't guaranteed in practice.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.