A shell company that raises money on the stock market, then merges with a private company to take it public.
A Special Purpose Acquisition Company is a shell company with no actual business of its own, formed purely to raise money through an IPO and then merge with a private company within a set window, usually a couple of years, effectively taking that company public through the back door instead of a traditional IPO process. SPACs surged in popularity for a stretch as a faster, less scrutinized path to going public, but a wave of underwhelming mergers afterward left many investors burned, and regulators have since tightened the rules around how they operate.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.