What Is The Difference Between Spac And De-Spac?
Are you looking to invest in a company or take your own public? If so, you may have come across the terms SPAC and de-SPAC. While they sound similar, there are key differences between the two that can greatly impact your decision. As a procurement specialist, it’s important to understand these differences in order to make an informed choice. In this blog post, we’ll break down what SPAC and de-SPAC mean, their benefits, and ultimately help you decide which option is best for you. So let’s dive in!
What is spac?
SPAC, or Special Purpose Acquisition Company, is a type of investment vehicle that raises funds through an initial public offering (IPO) with the sole purpose of acquiring or merging with another company. Essentially, it’s a blank check company created by investors for the purpose of finding and acquiring an already established private company.
Upon creating a SPAC, the founders have two years to identify and acquire their target company. If they fail to do so within this timeframe, the SPAC must be liquidated and all funds returned to investors.
One benefit of investing in a SPAC is that it allows individual investors access to private companies that would otherwise only be available to large institutional investors. In addition, unlike traditional IPOs where shares are priced before going public, SPAC shares are typically sold at $10 per share before any merger takes place.
While there are certainly risks associated with investing in a SPAC since you’re essentially betting on the management team’s ability to identify and successfully merge with a target company, many view them as an innovative alternative investment option worth considering.
What is de-spac?
De-SPAC is the opposite of SPAC or Special Purpose Acquisition Company. Instead of raising funds to acquire a company, de-SPACing happens when a private company merges with an existing public shell company that was formed as a SPAC.
Once the merger has been completed and approved by shareholders, the private company becomes publicly traded through the already-listed SPAC. This process allows companies to bypass some of the traditional initial public offering (IPO) requirements and timeline.
De-SPAC transactions have become increasingly popular in recent years as more companies seek alternative ways to go public. It allows for greater flexibility in terms of valuation, dilution, and control compared to traditional IPOs.
However, there are also potential downsides to de-SPACing such as increased regulatory scrutiny and shareholder lawsuits if performance expectations aren’t met post-merger. Ultimately, it’s important for companies considering this route to carefully weigh their options and consult with legal and financial advisors before proceeding with de-SPACing.
The benefits of spac
SPACs, also known as Special Purpose Acquisition Companies, have become increasingly popular among investors in recent years. One of the main benefits of SPACs is that they provide a quicker and more cost-effective way for companies to go public. Rather than undergoing the traditional IPO process which can take months and incur significant fees, a company can merge with a SPAC and become publicly traded within weeks.
Another benefit of SPACs is that they offer more flexibility for investors. Investors have the option to invest in a SPAC before it has identified an acquisition target or wait until an acquisition has been announced. This allows investors to have more control over their investments and potentially avoid investing in companies they do not believe in.
SPACs also offer potential upsides for both sides of the merger. For the acquiring company, merging with a successful SPAC could result in increased visibility, access to capital markets, and greater liquidity for existing shareholders. For investors who invest early on in successful SPACS, there is potential for significant returns on investment.
While there are some risks associated with investing in SPACS such as uncertainty around future acquisitions or management teams’ ability to execute their plans after going public, these benefits make them an attractive option for many investors looking to diversify their portfolios or get involved early on with promising companies.
The benefits of de-spac
De-SPAC transactions refer to the process of a Special Purpose Acquisition Company (SPAC) acquiring an existing company and taking it public. Here are some benefits of de-SPAC:
1) Access to capital: One major advantage of de-SPAC is that it provides access to capital for the acquired company. This helps them to expand their operations, innovate, repay debt and attract new investors.
2) Quick path to going public: De-SPAC provides a quicker path to becoming a publicly traded company compared with traditional IPOs. It can take six months or less from announcement until trading begins on NASDAQ or NYSE.
3) Reduced regulatory requirements: As SPACs are already registered with the SEC, there are fewer regulatory hurdles for companies that go public via de-SPAC than through an IPO.
4) Expertise and resources: The sponsors who create SPACS typically have experience in finance, business strategy, and mergers & acquisitions. These expertise help target acquisition candidates with higher growth potential
5) Lower costs: De-SPAC transactions tend to be cheaper than traditional IPOs as they do not require underwriter fees which could range between 7% – 10% of total proceeds raised in an IPO.
De-SPAC offers several advantages over traditional methods of going public; this has contributed significantly towards its increasing popularity among businesses looking for alternative options when considering their future plans.
Spac vs. de-spac: which is better for you?
When it comes to deciding between Spac and de-spac, there are a number of factors to consider. One key consideration is timing. If you’re looking for a quick way to go public and access capital, then Spacs may be the better option for you. However, if you’re willing to take on more risk and wait longer for potential returns, then de-spacs may be the way to go.
Another factor to consider is control. With Spacs, investors have less control over the investment decisions made by management teams compared with direct investments in companies via de-spac transactions. This can lead to greater uncertainty around future growth prospects and potential returns.
In terms of cost, Spacs tend to come with higher fees due to their complex structure and additional legal fees involved in their formation. De-spacs can offer lower costs as they involve acquiring an already established company rather than creating one from scratch.
Ultimately, which option is better for you depends on your individual circumstances and investment goals. It’s important to conduct thorough research before making any decisions and consult with experienced professionals in the field of procurement finance where necessary.
Conclusion
To sum it up, SPAC and de-SPAC are two different approaches that can be taken by companies to go public. While SPACs provide a simpler method for going public, de-SPACs offer more control over the process.
If you’re considering going public through either of these methods, it’s important to carefully evaluate your options and choose the one that best suits your specific needs.
At the end of the day, whether you decide to go with a SPAC or a de-SPAC will depend on factors such as your company’s goals, financial situation and risk tolerance.
Whichever route you choose, working with an experienced team of professionals is key to ensuring success in this complex process. From procurement specialists to legal advisors and investment bankers – assembling a strong team can help ensure that everything goes smoothly when taking your company public.