Structure
SPAC
A shell company that raises cash in an IPO and then has a fixed window to merge with a private business, or return the money.
Also written: special purpose acquisition company, blank-check company, blank check company
A special purpose acquisition company has no operations and no product. It exists to raise money from public investors, hold that money in trust, and use it to buy a private company that then becomes public through the merger.
The structure is a bargain with a clock attached. Investors hand over cash on the promise that a named management team will find a target within a stated period, usually 18 to 24 months. If the team succeeds, shareholders vote and can either stay in the combined company or take their money back. If the team fails, the trust is returned and the sponsor loses what it put in.
The SEC classifies these registrants under Standard Industrial Classification code 6770, which is why every SPAC on this site can be traced back to a single, complete source.
Why it matters
Because the money sits in trust and the redemption right is contractual, a SPAC before its deal is closer to a short-dated cash instrument than to an equity. That is the whole reason arbitrage desks own them.
Related terms
Trust account
The segregated account holding the IPO proceeds, invested in short-dated government securities and released only on a closing or a liquidation.
Business combination
The merger that turns the shell and a private company into one listed operating business.
Redemption
A public shareholder's right to hand back shares for their pro-rata share of the trust, exercisable at a vote.
Sponsor
The entity that forms the SPAC, funds its costs, and holds the founder shares that pay off only if a deal closes.
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.