What’s a SPAC?
A SPAC is a common alternative to the traditional initial public offering (IPO) technique. SPACs are shell companies that have no business operations.
You may be wondering why someone would create a company without real business operations. The sole purpose of a SPAC is to raise money to support the future acquisition of a target company. After a SPAC goes through an IPO, it puts the money it raised into an interest-bearing trust account. This account will remain untouched until the SPAC management team finds a private company to take public.
SPACs are also known as “blank check companies” because investors don’t know what the targeted acquisition will be. At Vanguard, clients may begin purchasing SPACs after the initial IPO, when the SPAC units begin trading on the secondary market.