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An Introduction to SPACs

Updated: Oct 15, 2021

A SPAC (special purpose acquisition company) is a listed equity vehicle allowing a team

of managers with outstanding track records (sponsor) to raise capital through an IPO for the purpose of acquiring private operating companies (targets) through a business combination.


For an accredited investor, SPACs provide access

to potentially high-growth IPO investments

that are typically unavailable to the retail investor.


A SPAC fuels the growth of its combination target by providing significant capital and access to public capital markets in an accelerated timeline, up to 4x faster, than a traditional IPO.


The SPAC journey, from fundraising to combination, can take as little as six months up to 24 months.



Participants in a SPAC


Sponsor Entity (Sponsor)

The Sponsor, which raises capital from Founder Investors, provides the capital to form and fund the SPAC through IPO. The Sponsor also leads the search for a target company for business combination, including originating, analyzing, and closing the deal.


Founder Investors

Founder Investors invest in the Sponsor entity in exchange for membership interests (a/k/a LLC Interests). Those membership interests convert to shares in the SPAC post-business combination.


Special Purpose Acquisition Company (SPAC)

The publicly listed company formed with the purpose of merging with a private business combination target.


Target Company

A private company that would like to go public through a SPAC combination rather than the traditional IPO route.




In addition, the SPAC transaction ecosystem includes auditors, accounting firms, trust administrators, book-running managers, law farms and other service providers that assist the sponsor in creating successful business combinations.


Advantages of Investing in a SPAC


Pre-IPO Access

SPACs provide access to potentially high growth investments at the IPO stage that are historically unavailable to retail investors.


Share Price Discounts

Investing in the Sponsor as a Founder Investor can offer discounts to the initial public offering price.


Additional Profit Opportunities

Institutional investors can invest in the initial SPAC and purchase additional shares after the acquisition through warrants.


 

BIG Acquisition Corp. Special Purpose Acquisition Companies (SPACs), Digital World Investment Corporation, Maquia Capital Acquisition Corporation, and Benessere Capital Acquisition Corp., are separate entities from Benessere Investment Group, with separate management. There is overlap in personnel involved. Any historical results of these transactions are not necessarily indicative of future performance.