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A special-purpose acquisition company ( SPAC ; / s p æ k / ), also known as a " blank check company ", is a shell corporation listed on a stock exchange with the purpose of acquiring (or merging with) a private company , thus making the private company public without going through the initial public offering process, which often carries significant procedural and regulatory burdens. According to the U.S. Securities and Exchange Commission (SEC), SPACs are created specifically to pool funds to finance a future merger or acquisition opportunity within a set timeframe; these opportunities usually have yet to be identified while raising funds.

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62-533: SPAC primarily refers to a special-purpose acquisition company , a method of taking a company public by merging it with an already public investment company. SPAC may also refer to: Special-purpose acquisition company In the U.S., SPACs are registered with the SEC and considered publicly traded companies. The general public may buy their shares on stock exchanges before any merger or acquisition takes place. For this reason they have at times been referred to as

124-452: A fairness opinion from an independent investment banking firm states that the combination is fair to the shareholders. SPAC Research, an entity running a SPAC database, maintains an underwriter league table which can be sorted by bookrunner volume or other criteria for any year or selection of years. As of January 2021 I-Bankers Securities Inc. stated that it had participated in 132 SPAC IPOs as lead or co-manager since 2004. In

186-452: A merger or an acquisition ; past this deadline the SPAC will dissolve and return assets to its stockholders . In practice, SPAC sponsors often extend the life of a SPAC by making a contribution to the trust account to entice shareholders to vote in favor of a charter amendment that delays the liquidation date. In addition, the target of the acquisition must have a fair market value that

248-513: A "Private Fund Limited Partnership" (PFLP), which is available for collective investment schemes constituted by an agreement in writing. The order relaxed the rules applying to private fund partnerships in order to remove some uncertainty in the application of the law, reduce administrative costs, and help ensure "that the UK remains an attractive and competitive location for private investment funds in comparison to other jurisdictions". The relaxation of

310-476: A SPAC is typically filed with the SEC under an S-1 registration statement (or an F-1 for a foreign private issuer) and is classified by the SEC under SIC code 6770 - Blank Checks . Full disclosure of the SPAC structure, target industries or geographic regions, management team biographies, share ownership, potential conflicts of interest and risk factors are standard material covered in the S-1 registration statement. It

372-401: A SPAC typically receives 20% of the equity in the vehicle at the time of offering, exclusive of the value of the warrants. The equity is usually held in escrow for two to three years, and management normally agrees to purchase warrants or units from the company in a private placement immediately prior to the offering. The proceeds from this sponsor investment (usually equal to between 2% and 8% of

434-673: A business combination in China, have been incorporating a 30/36 month timeline to account for the additional time that it has taken previous similar entities to successfully open their business combinations. Since the 1990s, SPACs have existed in the technology, healthcare, logistics, media, retail and telecommunications industries. Their history began with investment bank GKN Securities , specifically, founders David Nussbaum, Roger Gladstone, and Robert Gladstone, who later founded EarlyBirdCapital with Steve Levine and David Miller (currently managing partner of Graubard Miller law firm) and who developed

496-462: A form of corporate organization roughly equivalent to a master limited partnership . A Kommanditgesellschaft auf Aktien has two types of participators. It has at least one partner with unlimited liability (Komplementär). It is in that sense a private company. Komplementärs are natural persons or legal persons . If the Komplementär is a corporation with limited liability then the type of

558-474: A hopeful outlook for 2024. Limited partnership A limited partnership ( LP ) is a type of partnership with general partners who have a right to manage the business and limited partners who have no right to manage the business but have only limited liability for its debts. Limited partnerships are distinct from limited liability partnerships , in which all partners have limited liability. The general partners (GPs) are, in all major respects, in

620-422: A single SPAC IPO garnered $ 36 million, marking a modest start. Over the years, activity increased, peaking in 2021 with 613 IPOs that collectively raised around $ 162 billion, averaging $ 265 million per IPO. A study found that as of the 1st of December 2022, American-listed SPACs that completed their mergers between July 2020 and December 2021 had a mean share price of $ 3.85. This constitutes a fall of over 60% from

682-489: Is believed that the SEC has studied SPACs to determine whether they require special regulations to ensure that these vehicles are not abused as blind pool trusts and blank-check corporations have been over the years. Many believe that SPACs do have corporate governance mechanisms in place to protect shareholders. SPACs listed on the American Stock Exchange are required to be Sarbanes-Oxley compliant at

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744-887: Is contingent upon them not taking an active role in the management of the partnership. LPFs were introduced in 2020 and are intended to provide a domestic Hong Kong vehicle for private equity funds. Japanese law has historically provided for two business forms similar to limited partnerships: In 1999, the Diet of Japan passed legislation enabling the formation of "limited partnerships for investment" ( 投資事業有限責任組合 , tōshi jigyō yūgen sekinin kumiai ) . These are very similar to Anglo-American limited partnerships, in that they adopt most provisions of general partnership law but provide for limited liability for certain partners. Profits of an investment limited partnership pass through to all partners proportional to their investment share. For tax purposes, profits and losses will only pass through to

806-491: Is customary that the documentation and electronic materials issued to the public by the firm will carry a clear statement identifying the legal nature of the firm and listing the partners separately as general and limited. Hence, unlike the GPs, the limited partners do not have inherent agency authority to bind the firm unless they are subsequently held out as agents (and so create an agency by estoppel ); or acts of ratification by

868-449: Is equal to at least 80% of the SPAC's net assets at the time of acquisition. Previous SPAC structures required a positive shareholder vote by 80% of the SPAC's public shareholders for the transaction to be consummated . However, current SPAC provisions do not require a shareholder vote for the transaction to be consummated unless as follows: To allow for stockholders of the SPAC to make an informed decision on whether they wish to approve

930-550: Is the stock of the company (Grundkapital) and divided into shares. A KGaA is in that aspect comparable with a German Aktiengesellschaft . The investment of all partners is the corporate's total capital (Gesamtkapital). The KGaA is a traditional type of very large family businesses (that are partly publicly traded) in Germany; the consumer products giant Henkel , pharmaceutical company Merck and media conglomerate Bertelsmann are prominent examples. In case of Merck, besides

992-573: The Department for Business and Trade ) consulted in 2008 on proposals to modify and merge the two Acts, but the proposals did not go ahead. Scots law on partnerships (including limited partnerships) is distinct from English law . Under Scots law, partnerships are legal persons distinct from the partners. However, lawsuits may still be filed against the partners by name, the general partners are still exposed to 'pass-through' liability, and partners are still jointly and severally liable (although in

1054-632: The Limited Partnership Ordinance and limited partnership funds, known as "LPFs", governed by the Securities and Futures Ordinance . Neither limited partnerships nor LPFs are separate and distinct legal persons. Instead, they are simply partnerships of persons, some of whom enjoy limited liability as a result of compliance with statutory requirements. Like many other jurisdictions, the partners who enjoy such limited liability are known as limited partners and their limited liability

1116-477: The London Stock Exchange AIM exchange. These SPACs do not have the aforementioned voting thresholds. Since the financial crisis, protections for common shareholders have been implemented, allowing stockholders to vote in favor of a deal and still redeem their shares for a pro-rata share of the trust account. (This is significantly different from the blind pool – blank check companies of

1178-594: The Napoleonic Code (1807) reinforced the limited partnership concept under European law. In the United States , limited partnerships became widely available in the early 19th century, although a number of legal restrictions at the time made them unpopular for business ventures. Britain enacted its first limited partnership statute in 1907. A kommanditselskab (abbreviated K/S) is the Danish equivalent of

1240-507: The Uniform Limited Partnership Act (to the extent the amendments are adopted by state legislature) also permitted limited partnerships to become limited liability limited partnerships in states that adopt the change. Under this form, debts of a limited liability limited partnership are solely the responsibility of the partnership, thereby removing general-partner liability for partnership obligations. This change

1302-780: The "poor man's private equity funds ." The majority of companies pursuing SPACs do so on the Nasdaq or New York Stock Exchange in the US, although other exchanges, such as the Euronext Amsterdam , Singapore Exchange , and Hong Kong Stock Exchange have also overseen a small volume of SPAC deals. Despite the popularity and growth in the number of SPACs, academic analysis shows investor returns on SPAC companies post-merger are almost uniformly negative, although investors in SPACs and merged companies may earn excess returns immediately after

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1364-554: The 1980s, which were a form of limited partnership that did not specify what investment opportunities the company plans to pursue.) The assets of the trust are only released if a business combination is approved by the voting shareholders, or a business combination is not consummated within the amount of time allowed by a company's articles of incorporation. The SPAC is usually led by a management team composed of three or more members with prior private equity , mergers and acquisitions , and/or operating experience. The management team of

1426-442: The GPs will be the ones which are personally liable. Limited partners are subject to the same alter-ego piercing theories as corporate shareholders. However, it is more difficult to pierce the limited partnership veil because limited partnerships do not have many formalities to maintain. So long as the partnership and the members do not co-mingle funds, it would be difficult to pierce the veil. In some jurisdictions (for instance in

1488-718: The New Zealand Companies Office . Registration, maintenance and annual return filing for Limited Partnerships and Overseas Limited Partnerships are conducted through manual forms. In the United Kingdom , limited partnerships are governed by the Limited Partnerships Act 1907 and, on matters on which that Act is silent, also by the Partnership Act 1890 . The UK Department for Business, Enterprise and Regulatory Reform (now

1550-455: The SPAC market faced challenges with only 31 IPOs due to higher interest rates and stricter financial policies. However, there were signs of stabilization towards the year's end. The total raised was $ 3.8 billion, with an average IPO size of $ 124.1 million, and 98 mergers were completed. A slight improvement in initial trading performance by December suggested a potential stabilization, with IPOs closing slightly above their expected values, offering

1612-452: The SPAC market shrank significantly, with only 86 SPAC IPOs compared to 613 in 2021, reflecting more challenging economic conditions and increased regulatory scrutiny. Total funds raised dropped to $ 13.4 billion from $ 162.5 billion in 2021, and the average IPO size decreased from $ 265.1 million to $ 156.1 million. Despite these challenges, 103 merger deals were completed, illustrating ongoing difficulties in securing successful mergers. In 2023,

1674-510: The SPAC's performance. By market convention, 85% to 100% of the proceeds raised in the IPO for the SPAC are held in trust to be used at a later date for the merger or acquisition. A SPAC's trust account can only be used to fund a shareholder-approved business combination or to return capital to public shareholders at a charter extension or business combination approval meeting. Each SPAC has its own liquidation window within which it must complete

1736-566: The U.S. The first German SPAC was Germany1 Acquisition Ltd., which raised $ 437.2 million at Euronext Amsterdam with Deutsche Bank and I-Bankers Securities as underwriters. Loyens & Loeff served as legal counsels in The Netherlands . In March 2021, a report prepared by Lord Hill for the Chancellor of Exchequer recommended a series of changes to London company listing rules to make them more favorable to SPAC listings. Among

1798-455: The UK), the limited liability of the limited partners is contingent on their not participating in management. Partnership interests (including the interests of limited partners) are afforded a significant level of protection through the charging order mechanism. The charging order limits the creditor of a debtor-partner or a debtor-member to the debtor's share of distributions, without conferring on

1860-451: The amount being raised in the public offering) are placed in the trust and distributed to public stockholders in the event of liquidation. No salaries, finder's fees, or other cash compensation are paid to the management team prior to the business combination, and the management team does not participate in a liquidating distribution if it fails to consummate a successful business combination. In many cases, management teams agree to pay for

1922-416: The business combination, the company must make full disclosure to stockholders of the target business, including complete audited financials, and terms of the proposed business combination via an SEC merger proxy statement. All common share stockholders of the SPAC are granted voting rights at a shareholder meeting to approve or reject the proposed business combination. A number of SPACs have also been placed on

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1984-428: The case of limited partners, only to the extent of their capital contribution). There has been discussion over whether limited partnerships operating under English law should be made separate legal entities as under Scots law, and in the same way as limited liability partnerships are. The Law Commission report on partnership law LC283 suggested that creation of separate legal personality should be left as an option for

2046-449: The company has to be named as UG (haftungsbeschränkt) & Co. KGaA , GmbH & Co. KGaA , AG & Co. KGaA or SE & Co. KGaA . Under consideration of the aspects of European freedom of establishment it is also possible that corporations established under foreign law can become Komplementärs of a KGaA forming companies like Limited & Co. KGaA . The investment of the partners with limited liability (Kommanditisten)

2108-439: The creditor any voting or management rights. When the partnership is being constituted, or the composition of the firm is changing, limited partnerships are generally required to file documents with the relevant state registration office. Limited partners must explicitly disclose their status when dealing with other parties, so that such parties are on notice that the individual negotiating with them carries limited liability. It

2170-460: The dilutive impacts of compensation and securities issuances. These developments aim to enhance transparency and integrity within the SPAC ecosystem, reflecting a cautious approach to regulation without fundamentally altering existing practices. Warren commended the SEC on the new rules. According to an industry study published in January 2019, from 2004 through 2018, approximately $ 49.14 billion

2232-441: The existing framework. Critical updates include maintaining the current stance on SPACs under the '40 Act and the definition of banks as underwriters while refining the criteria for forward-looking statements by redefining "blank check company" and eliminating one safe harbor provision. Additionally, the SEC has encouraged more realistic management projections for DeSPAC transactions and required detailed disclosures on board votes and

2294-467: The expenses in excess of the trusts if there is a liquidation of the SPAC because no target has been found. Conflicts of interest are minimized within the SPAC structure because all management teams agree to offer suitable prospective target businesses to the SPAC before any other acquisition fund, subject to pre-existing fiduciary duties. The SPAC is further prohibited from consummating a business combination with any entity affiliated with an insider, unless

2356-579: The firm create ostensible authority. The societates publicanorum , which arose in Rome in the third century BC, may have arguably been the earliest form of limited partnership. During the heyday of the Roman Empire , they were roughly equivalent to today's corporations . Some had many investors, and interests were publicly tradable. However, they required at least one (and often several) partners with unlimited liability. A very similar form of partnership

2418-442: The general partner(s) while the partnership has negative equity (i.e. liabilities exceeding assets); however, profits and losses while the partnership has positive equity are shared equally. In New Zealand , Limited Partnerships are a form of partnership involving General Partners, (who are liable for all the debts and liabilities of the partnership) and Limited Partners (who are liable to the extent of their capital contribution to

2480-501: The largest SPACs of 2018, with $ 690mm each in IPO proceeds. In 2019, 59 SPAC IPO's raised $ 13.6 billion. Nearly 250 SPACs raised more than $ 83 billion in 2020. In the first month of 2021 there were 75 SPACs. In a March 2020 event, Allison Lee , acting chair of the SEC , said that the "investment returns don't match the hype surrounding the SPAC bubble." From 2009 to 2024, the landscape of SPAC IPOs has seen considerable variance. In 2009,

2542-432: The law in relation to PFLPs was welcomed by the financial industry. In the United States , the limited partnership organization is most common among film production companies and real estate investment projects, or in types of businesses that focus on a single or limited-term project. They are also useful in " labor - capital " partnerships, where one or more financial backers prefer to contribute money or resources while

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2604-424: The letter "u" (for unit) appended to the ticker symbol of SPAC shares. Trading liquidity of the SPAC's securities provide investors with a flexible exit strategy. In addition, the public currency enhances the position of the SPAC when negotiating a business combination with a potential merger or acquisition target. The common share price must be added to the trading price of the warrants to get an accurate picture of

2666-568: The limited liability enjoyed by limited partners was contingent upon their refraining from taking any active role in the management of the firm. However, Section 303 of the Revised Uniform Limited Partnership Act (if adopted by a state legislature) eliminates the so-called "control rule" with respect to personal liability for entity obligations and brings limited partners into parity with LLC members, LLP partners and corporate shareholders. The 2001 amendments to

2728-474: The limited partners have no management authority, and (unless they obligate themselves by a separate contract such as a guarantee) are not liable for the debts of the partnership. The limited partnership provides the limited partners a return on their investment (similar to a dividend ), the nature and extent of which is usually defined in the partnership agreement. General Partners thus bear more economic risk than do limited partners, and in cases of financial loss,

2790-624: The limited partnership. The owners are divided into general partners (komplementarer in Danish) and limited partners (kommanditister in Danish). Often the only general partner of a K/S is an Anpartsselskab with the least possible capital, thus reducing the liability of the K/S to the capital of the Anpartsselskab. Kommanditgesellschaft auf Aktien – abbreviated KGaA – is a German corporate designation standing for 'partnership limited by shares',

2852-467: The merger. Proliferation of SPACs usually accelerates around periods of economic bubbles, such as the " everything bubble " between 2020 and 2021. SPACs generally trade as units or as separate common shares and warrants on the Nasdaq and New York Stock Exchange (as of 2008) once the public offering has been declared effective by the SEC, distinguishing the SPAC from a blank check company formed under SEC Rule 419 . Commonly, units are denoted with

2914-474: The ordinary course of the partnership's business. As with a general partnership, "an act of a general partner which is not apparently for carrying on in the ordinary course the limited partnership's activities or activities of the kind carried on by the limited partnership binds the limited partnership only if the act was actually authorized by all the other partners." Like shareholders in a corporation , limited partners have limited liability . This means that

2976-606: The other partner performs the actual work. In such situations, liability is the driving concern behind the choice of limited partnership status. The limited partnership is also attractive to firms wishing to provide shares to many individuals without the additional tax liability of a corporation. Private equity companies almost exclusively use a combination of general and limited partners for their investment funds. Well-known limited partnerships include Enterprise Products and Blackstone Group (both of which are public companies ), and Bloomberg L.P. (a private company ). Before 2001,

3038-510: The owning family Merck also the members of the executive board are fully and privately liable for the company (including a period after withdrawal). Also the German football club Borussia Dortmund uses this corporate organization (as Borussia Dortmund GmbH & Co KGaA ) for its professional football team as part of its compliance with the " 50+1 rule ". Hong Kong offers two forms of limited partnerships, namely limited partnerships governed by

3100-407: The partners to decide upon when a partnership is formed. There were concerns that automatically making partnerships separate legal entities would restrict their ability to trade in some European countries and also expose them to different tax regimes than expected. The Legislative Reform (Private Fund Limited Partnerships) Order 2017 made provision for partners to register their limited partnership as

3162-479: The partnership). The Limited Partnerships Act 2008 replaces Special Partnerships that exist under Part 2 of the Partnership Act 1908. Special partnerships are considered obsolete as they do not provide the appropriate structure preferred by foreign venture capital investors. Features of Limited Partnerships include: The registers of Limited Partnerships and Overseas Limited Partnerships are administered by

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3224-653: The qirad but whether the qirad transformed into the commenda, or the two institutions evolved independently cannot be stated with certainty. In the Mongol Empire , the contractual features of a Mongol- ortoq partnership closely resembled that of qirad and commenda arrangements, however, Mongol investors were not constrained using uncoined precious metals and tradable goods for partnership investments and executed money-lending. Moreover, Mongol elites formed trade partnerships with merchants from Italian cities, including Marco Polo 's family. Colbert's Ordinance (1673) and

3286-700: The report's proposals is to reduce the percentage of shares that must be offered to the public from 25% to 15%. On March 18, 2022, Aquila Acquisition Corp debuted on the Hong Kong Exchanges and Clearing Limited (HKEX). The IPO received lukewarm reception by investors, with shares down 3% in the two-week period post-IPO. Despite this decrease, there is a high demand for SPAC public offerings in Hong Kong, with HKEX reporting that they have received applications for 11 additional SPAC IPOs. Emerging market focused SPACs, particularly those seeking to consummate

3348-423: The same legal position as partners in a conventional firm: they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership. As in a general partnership, the GPs have actual authority, as agents of the firm, to bind the partnership in contracts with third parties that are in

3410-445: The standard $ 10 per share that SPAC shareholders could have received if they redeemed their shares. The study also found that “ The average post-merger SPAC during this period underperformed the average traditional IPO by 26%. ” Another study, focusing on a longer timeframe of U.S. SPACs from December 2012 until June 2021 found average stock price decreases of 14.1% after 1 year of the merger announcement and 18% after 2 years. In 2022,

3472-460: The template. The success of SPACs in building equity value for their shareholders has drawn interest from investors such as Bill Ackman who had backed three SPACs as of 2015, including the SPAC that took Burger King public. *As of 16 May 2024 In the US the SPAC public offering structure is governed by the Securities and Exchange Commission (SEC). A public offering for

3534-563: The time of the offering, including such mandatory requirements as a majority of the board of directors being independent , and having audit and compensation committees . In 2022, Elizabeth Warren released a report showing that Wall Street insiders were using SPACs in ways that harmed investors, and called for regulations to curb the abuse. On January 24th, 2024, the SEC unveiled new rules for Special Purpose Acquisition Companies (SPACs), introducing clarifications to enhance regulatory transparency and integrity without significantly altering

3596-515: The years leading up to 2021, bulge bracket banks started participating in more SPAC IPOs, with Cantor Fitzgerald & Co . and Deutsche Bank Securities Inc. on the cover of 30 SPAC IPOs from 2015 to August 2019. Citigroup, Credit Suisse , Goldman Sachs , and BofA have all built a significant SPAC practice, while Cantor Fitzgerald led all SPAC underwriters in 2019 by book-running 14 SPACs that raised over US$ 3.08 billion in IPO proceeds. In July 2007, Pan-European Hotel Acquisition Company N.V.

3658-404: Was lost as long as the trader had not violated the rules of the contract. In contrast, his investment partners on land had unlimited liability and were exposed to risk. A commenda was not a common form for a long-term business venture as most long-term businesses were still expected to be secured against the assets of their individual proprietors. As an institution, the commenda is very similar to

3720-452: Was present in Arabia at the time of the coming of Islam ( c.  700CE ), and this became codified into Islamic law as Qirad . In medieval Italy , a business organization known as the commenda appeared in the 10th century that was generally used for financing maritime trade. In a commenda, the traveling trader of the ship had limited liability, and was not held responsible if money

3782-440: Was raised across 332 SPAC IPOs in the US. In that period, 2018 was the largest year for SPAC issuance since 2007, with 46 SPAC IPOs raising approximately $ 10.74 billion. SPACs seeking an acquisition in the energy sector raised $ 1.4bn in 2018, after raising a record $ 3.9bn in 2017. NASDAQ was the most common listing exchange for SPACs in 2018, with 34 SPACs raising $ 6.4bn. GS Acquisition Holdings Corp. and Churchill Capital Corp. raised

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3844-468: Was the first SPAC offering listed on the Euronext Amsterdam, raising approximately €115 million. I-Bankers Securities has been the underwriter with CRT Capital Group as lead-underwriter. That listing on NYSE Euronext (Amsterdam) was followed by Liberty International Acquisition Company, raising €600 million in January 2008. Liberty is the third largest SPAC in the world and the largest outside

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