A SPAC (Special Purpose Acquisition Company) is a listed vehicle with the purpose of acquiring, one privately held or group of companies. A SPAC raises funds through an initial public offering (IPO) for the ain’t of acquiring an existing operating company.
SPACs raise money primarily from public-equity investors and have the capacity to derisk and shorten the IPO process for their target companies, which often offer better terms than a traditional IPO would.
Process of a SPAC (Special Purpose Acquisition Company)
The SPAC process is initiated by the sponsors with expertise in a specific industry or business sector, and they pursue deals in that area. These sponsors invest risk capital in the form of nonrefundable payments to certain professionals in order to cover operating expenses. If sponsors fail to establish a combination within two years, the SPAC must be discontinued and all funds returned to the original investors. The sponsors will lose their risk capital if dissolved but if they succeed, they earn sponsors’ shares in the joint corporation.
Normally, a SPAC is formed by a competent management team or a sponsor with nominal invested capital.
A SPAC has a limited lifetime, usually between 18 and 24 months, a period during which it has to specify a target and complete its acquisition. If the SPAC fails to finalize an acquisition by the related deadline, the funds raised during the IPO are returned to investors.
Cons of a SPAC
SPACs provide private companies with a distinctive way to access the public markets while offering investors a way to co-invest side-by-side with best-in-class sponsors.
SPACs offer benefits for companies planning to go public. It provides access to public markets and experienced sponsors and provides an investor-friendly approach. It also gives the option to withdraw from a future deal if the investors disproved the transaction considered by the SPAC.
With a reliable corporate law environment and SPAC-aware regulatory authorities, Luxembourg is the perfect drop point for new SPACs.
To set up your SPAC in Luxembourg, let’s go ahead and contact your Damalion expert now.
