Why would a company merge with a SPAC?

Why would a company merge with a SPAC?

Among the key benefits of merging with a SPAC are: Public Listing. They offer a relatively easy path to a public listing, without market or pricing risks. With public equity, companies can offer more attractive compensation packages to key employees and a valuable non-cash currency for financing acquisitions.

What SPAC is taking Wework public?

BowX Acquisition Corp.
Instead of going public through a traditional initial public offering (IPO), the New York City-based company completed a $9 billion merger with blank check firm BowX Acquisition Corp. (BOWX), a listed special purpose acquisition company (SPAC).

What is going public through SPAC?

A SPAC raises capital through an initial public offering (IPO) for the purpose of acquiring an existing operating company. Subsequently, an operating company can merge with (or be acquired by) the publicly traded SPAC and become a listed company in lieu of executing its own IPO.

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What is SPAC merger?

A special purpose acquisition company (SPAC) is a company that has no commercial operations and is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring or merging with an existing company.

Does FaZe clan have a stock?

FaZe Clan’s shift to be a publicly-traded company is quite surprising, mainly because it’s not doing so through a traditional initial public offering (IPO). Instead, it’s merging with a SPAC company and becoming publicly traded on NASDAQ.

What is SPAC deal?

Why do SPACs drop after merger?

At merger time, SPAC shares maintain their $10 nominal value. But their real value soon drops due to dilution when the merger occurs. For all shareholders, dilution arises from paying the sponsor’s fee in shares (called the “promote,” often about 20\% of the equity).

How does a SPAC deal work?

A SPAC raises money via an initial public offering. During the search, the money is safely invested in government bonds. The value of the shares and warrants should trade at close to their launch price but can fluctuate if shareholders believe that management has identified an attractive acquisition target.

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What happens when a company merges with a SPAC?

By merging with a SPAC sponsor, existing companies can retain a stake in their business and gain access to liquidity that otherwise would not be available to them. The pool of capital available from SPACs has widened significantly. SPACs reached their previous height in 2007, raising $12 billion.

Will private equity firms become more involved in SPACs?

This trend will likely continue as a growing number of major private equity (PE) firms, venture funds and operators form more SPACs. SPACs are “blank check” companies created solely to raise capital through an IPO in order to merge with private companies.

Should private companies go public under a SPAC?

By going public under a SPAC, private companies benefit in the following ways: Small and mid-sized companies may want to continue to fund development, invest in brand awareness or make acquisitions to continue growing, but they may not be ideal candidates for traditional IPOs.

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What is an SPAC and how does it work?

SPACs behave much like PE firms in that a group of investors raise funds to strategically buy companies – the main difference being that the SPAC executes a public versus private offering. However, not all SPACs are the same.