Taking Stock Of SPACs

While the CPC program has existed for a number of years under the TSXV and Special Purpose Acquisition Companies (SPACs) have long been a feature of American capital markets, as we alerted in October of last year, SPACs are a relatively new arrival in Canada, with the first Canadian SPAC created in April 2015. The TSX has described SPACs as giving investors the ability to participate in the acquisition of private operating companies. Despite their attractions, SPACs have so far failed to meet investor expectations, both with respect to their ability to close transactions and their effect on private M&A.

A SPAC (also known as a "blank cheque company") works by raising capital from investors in order to acquire a company. In many respects, SPACs are similar to Capital Pool Companies on the TSXV, though with higher capital requirements and slightly different rules. In simple terms, a SPAC will complete an IPO by issuing units typically comprised of a share and a warrant.