How to read a SPAC prospectus in ten minutes

A SPAC prospectus runs to a few hundred pages and most of it is boilerplate that has been copied between deals for a decade. The parts that differ between one vehicle and another fit on a single page of notes. This is where to find them.

Start with the cover

The cover page carries the offering size, the unit composition and the underwriting syndicate. It tells you in thirty seconds how big the vehicle is, how much warrant coverage the sponsor had to give away to fill the book, and which banks were willing to put their name on it.

• Offering size and whether the over-allotment was exercised in full.
• Unit composition: one share plus what fraction of a warrant, and whether there are rights.
• Book-running managers, printed above the co-managers. The economics and the client relationship sit with the bookrunners.

Then the trust paragraph

Usually within the first few pages of the summary, one sentence states how much per unit goes into trust. If that figure is above $10.00, the sponsor overfunded the trust, which raises the redemption floor from day one and tells you something about how hard the offering was to sell.

The deadline and the extension mechanics

Find the outside date, then find out how it can move. Some charters let the sponsor extend unilaterally by depositing money into the trust. Others require a shareholder vote, which means a redemption window and a likely shrinking of the vehicle. The difference matters more than the headline date.

The dilution section

Look for the founder share count against the public share count. The conventional split is 25% of the public float, which is 20% of the combined total, bought for a nominal sum. Then add the warrants. Together these are what a holder who stays through a combination gives up, and they are the reason a de-SPAC at $10 is not an IPO at $10.

The underwriting section, near the back

This table lists each bank and the units allocated to it. It is the only place the syndicate's economics are disclosed, and it is far more informative than the cover, which only gives the pecking order. It also states the deferred underwriting fee, which is paid from the trust only if a deal closes.

What you can skip

• The risk factors, unless something in them is unusual. They are near-identical across vehicles.
• The description of securities, which restates the cover in legal language.
• The tax discussion, unless you have a specific reason to read it.