SPAC's - Special Purpose Acquisition Corporations

[Craig]

Our new Chairman told me last evening of SPAC's ... special purpose acquisition corporations:

Example ... http://askmerrill.ml.com/markets_news_story/1,2263,{06ED5A25-2AC7-499E-A5B6-0E4D515734DA},00.html

Emerging this year were special purpose acquisition corporations (SPACs), public entities that raise money to acquire companies in a specific industry. New York-based SPAC Federal Services Acquisition Corporation (FSAC) raised $126 million in an IPO to buy federal services companies.

As I understand it, this is rather like a PEG / private equity group (sort of a VC / venture capital firm) deal ... but for the everyman, and liquid.  Supposedly the sponsor does an IPO, the funds are held while the new company seeks investments, it is very liquid, and if the sponsor is unsuccessful in finding appropriate investments, the stockholders (except for the sponsor) get their funds back.

Haven't done any research on this, but sounds interesting ... and, our new Chairman is former CEO of a number of large household names ... he's an accomplished and successful investor and exec.  Good PEG's have be quite kind to their investors, and are a common investment now for qualified retirement plans. Perhaps this is a practical way to invest in this otherwise rarefied arena?

Anyone else heard of SPAC's, had experience with them, have an opinion?

Thanks.

 

[brewer12345]

Run. Run away as fast as you can. Pretend you are Forrest Gump.

AKA "blank check companies", these things work like this:

- do an IPO and put the proceeds in an escrow account
- suck money out of the account for 2 or 3 years to pay expenses, director's fees, etc.
- if they find something (anything) tobuy, raid the account and possibly raise more money.
- if they don't find anything to buy, gve the ruber, er, shareholders what is left in the escrow account.

The prospectuses I have read for these things give them leeway to throw your money at anything they can find ("insurance related businesses or assets", for example).

 

[Nords]

Anyone else heard of SPAC's, had experience with them, have an opinion?

Yeah, Prudential was selling SPACs limited partnerships by the bucketfulls in the '80s. Read Serpent on the Rock.

Now if you were in charge of your own SPAC and had a bunch of sheeple shareholders, that'd be a different story!

 

[brewer12345]

Now if you were in charge of your own SPAC and had a bunch of sheeple shareholders, that'd be a different story!

Funny, my boss was thinking the same thing a few months ago.

 

[ats5g]

From the street.com:

Blank-Check IPOs Probed

To some degree, it's not surprising that regulators would take a look at EarlyBird. David Nussbaum, EarlyBirdCapital's chairman, and Steven Levine, the firm's chief executive, both hail from GKN Securities, a defunct brokerage that tried to make a name for itself by underwriting blank-check IPOs. The firm, however, ran into its own problems with securities regulators in the 1990s.

But a person familiar with the latest investigation says one thing regulators are looking into is the relationship between EarlyBird and some of the firms that serve market-makers for its blank-check IPOs.

 

[Nords]

Here's the IPO I'm waiting for...