A SPAC’s IPO is typically based on an investment thesis focused on a sector and geography, such as the intent to acquire a technology company in North America, or a sponsor’s experience and background. Following the IPO, proceeds are placed into a trust account and the SPAC typically has 18-24 months to identify and complete a merger with a target company, sometimes referred to as de-SPACing. If the SPAC does not complete a merger within that time frame, the SPAC liquidates and the IPO proceeds are returned to the public shareholders.

Once a target company is identified and a merger is announced, the SPAC’s public shareholders may alternatively vote against the transaction and elect to redeem their shares. If the SPAC requires additional funds to complete a merger, the SPAC may issue debt or issue additional shares, such as a private investment in public equity (PIPE) deal.

The SPAC merger

Once formed, the SPAC will typically need to solicit shareholder approval for a merger and will prepare and file a proxy statement (or a joint registration and proxy statement on Form S-4 if it intends to register new securities as part of the merger). This document will contain various matters seeking shareholder approval, including a description of the proposed merger and governance matters. It will also include a host of financial information of the target company, such as historical financial statements, management’s discussion and analysis (MD&A), and pro forma financial statements showing the effect of the merger.

Once shareholders approve the SPAC merger and all regulatory matters have been cleared, the merger will close and the target company becomes a public entity. A Form 8-K, with information equivalent to what would be required in a Form 10 filing of the target company (commonly referred to as the Super 8-K), must be filed with the US Securities and Exchange Commission (SEC) within four business days of closing.

Overview of going public using a SPAC

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