Structure
Founder shares
The class of shares the sponsor buys before the IPO at nominal cost, typically 20% of the post-IPO share count.
Also written: promote shares, class b shares, sponsor shares
Founder shares, usually Class B, are bought by the sponsor for a token amount before the offering. They convert into ordinary shares on the completion of a business combination and are worthless if the vehicle liquidates.
The conventional size is 25% of the public float, which works out to 20% of the combined count. Some structures reduce it, and a sponsor may forfeit part of the block if the over-allotment option is not exercised in full.
Why it matters
The founder block is dilution every public shareholder carries into the merger. It is the main reason a de-SPAC at $10 is not economically the same thing as an IPO at $10.
Related terms
Promote
The sponsor's founder stake expressed as a share of the combined company, the compensation for putting the deal together.
Sponsor
The entity that forms the SPAC, funds its costs, and holds the founder shares that pay off only if a deal closes.
Dilution
The reduction in each share's claim on the combined company caused by founder shares, warrants and rights.
See the term in the wild: the screener shows trust size, per-share value and deadlines for every U.S. SPAC, and each profile links to the filings the numbers came from.
Definitions describe market practice and are not investment, legal or tax advice.