How To Invest In SPAC? Should You Invest In SPAC?

As a SPAC differs from your usual asset classes, you need to understand the advantages and disadvantages to decide if this fits your investment objectives.

Since all investments carry their own risk, we need to discuss the pros and cons of this investment product. Let’s dive into this in detail to check if you really want to invest your money in this asset class.

What Is A SPAC?

A Special Purpose Acquisition Company commonly referred to as SPAC, is a shell company that isn’t operating but is publicly listed. Its goal is to identify and buy private companies enabling the company targeted to be publicly listed on the stock market.

How Do SPACs Work?

Investors generally start SPACs with knowledge about a specific industry to get a good deal in that area. When a SPAC is started, the founders often have a couple of target companies in mind that they want to buy and invest their money in.

How Is A SPAC Different From An IPO?

One of the significant differences between SPAC and IPO is that SPAC IPO happens faster. It can take as little as eight weeks from creating SPAC to listing the IPO. This also means that most of the financial reporting, disclosures and due diligence associated with an IPO are skipped.

Pros Of Investing In SPACs

- Opportunity To Invest In Private Companies - Opportunity To Partner With Industry Professional - Great Opportunity For Growth

Risks Of Investing In SPACs

- Little Information - Incentives And Fees - Fluctuation Of Prices

How To Invest In SPACs?

To invest in SPACs, you can choose individual securities or invest in the SPAC ETF. By selecting individual SPACs, investors can focus on promising opportunities. Since the proceeds of SPAC IPO are put in bonds till the completion of the merger, shareholders can exit SPAC due to liquidation or by selling their shares in secondary markets.