Latest SPAC Trends Point To Risk Of Negative Outcomes

By Adam Karageorge, Adrienna Huffman and Monet Lee (June 17, 2022, 6:03 PM EDT) -- The 2020 and 2021 calendar years witnessed a boom in special purpose acquisition companies, with an unprecedented number going public. A SPAC is a shell company created by sponsors — typically private equity, venture capital or hedge fund investors — who raise funds by selling shares of the SPAC through an IPO.

The proceeds raised through the SPAC's IPO are held in a trust and used by the sponsors to identify and acquire a target company. SPACs seek to acquire or combine with an operating company through an initial business combination, and investors rely on the sponsors to execute the business...

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