Taking Stock Of SPACs: Update For 2016

Earlier this year, we discussed the arrival and usage of Special Purpose Acquisition Corporations (SPACs) in Canada, focusing on the logistics and purpose of these capital holding shell companies.

To recap, a SPAC is a shell company that raises money through an initial public offering (IPO), then searches for a private company to acquire and bring to the market (Target Company). SPACs were thought to be particularly useful in Canada as (i) they fill a traditional gap in capital markets, making private acquisitions in the $100 to $500 million range, (ii) they provide Target Companies with an easier and additional means of access to public markets (as compared to a traditional IPO) and (iii) they provide investors who would not be able to buy into hedge or private equity funds, the ability to participate in the acquisition of private operating companies traditionally targeted by those funds.