So in 2021, would you invest in a company set up to buy an undertaking at great advantage, but nobody to know what it is? That is essentially the investing proposition of Spacs (Special Purpose Acquisition Vehicles), and on some reckonings, 405 have together raised $125bn in the US since the beginning of last year. Here’s how they work:
1. A sponsor invites investors to subscribe for units, consisting of shares and warrants, in a shell company. The warrants are effectively market-priced options and so leveraged on the share price. Monies raised by the sponsor are held in trust and invested in six-month Treasury Bills.