About SPACs
Special Purpose Acquisition Companies, commonly known as "SPACs," have recently surged in popularity as an alternative to traditional acquisition vehicles, due to their ability to raise capital through the public equity markets. Formed for the purpose of acquiring one or more operating companies in a particular sector, nearly 30 SPACs filed initial public offering (IPO) registration statements with the Securities and Exchange Commission (SEC) between January and June 2005, compared with only 14 such filings during all of 2004. In addition, during that same period, SPACs have raised approximately $481 million in eight IPOs. For example, International Shipping Enterprises, Inc. and Services Acquisition Corp. International, which completed IPOs in December 2004 and July 2005, respectively, each raised well in excess of $100 million.
Despite their recently demonstrated potential to raise significant amounts of public equity, though, SPACs have not yet gained widespread acceptance within the financial and investment communities, due in part to their unique, and often misunderstood structure. The question remains whether SPACs will become an accepted way to access the public markets, or if they will instead remain a novel capital raising vehicle.
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