Ever wondered how companies go public without going through the long, traditional IPO process? That’s where SPACs (Special Purpose Acquisition Companies) come in. If you’ve heard the term but aren’t sure how it works, this guide will break it down in simple terms.
Step 1: Find a Strong Sponsor
Every SPAC starts with a sponsor—usually an experienced investor, fund, or firm that specializes in mergers and acquisitions. They set up the SPAC, invest initial funds, and lead the entire process. A strong sponsor brings credibility, making it easier to attract investors.
Step 2: Set Up the SPAC & Build a Team
Once the SPAC is formed, the sponsor puts together a management team with experience in business, investing, and deal-making. SPACs don’t have a specific company in mind when they go public. Instead, they pick an industry, such as technology or healthcare, and search for a target after the IPO.
Step 3: Get SEC Approval & Prepare for IPO
Before listing, the SPAC must submit an S-1 registration statement to the U.S. Securities and Exchange Commission (SEC). This document outlines the SPAC’s plan, risks, and financials. It serves as a pitch deck for investors, ensuring transparency. Once the SEC gives approval, the SPAC is ready for an IPO.
Step 4: Roadshow & Fundraising
Now it’s time to attract investors. The SPAC team goes on a roadshow, presenting to potential investors and explaining why they should invest. Once enough funds are raised, the money is placed in a trust account until a merger happens. Investors can withdraw their money before the deal is finalized.
Step 5: SPAC Goes Public
After fundraising, the SPAC officially lists on a stock exchange like NASDAQ or NYSE, and shares start trading. However, the SPAC itself is just a shell company at this stage—it still needs to find a private company to merge with.
Step 6: Find a Target & Complete the Merger
The real work begins after listing. The SPAC’s management team has 18 to 24 months to find a private company to merge with. If they successfully complete the deal, the private company becomes publicly traded through the SPAC. If no deal is made, the SPAC is dissolved, and investors get their money back.
Final Thoughts
SPACs offer a faster, more flexible way for companies to go public, but they also come with risks. Whether you’re an entrepreneur or investor, understanding the SPAC process helps you make smarter financial decisions.
Want to explore if SPACs are the right fit for your company? Consult with a professional listing advisory firm and take the next step toward going public.
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If you’re looking for a consulting firm in Malaysia, trust us at Hexcellence Consulting. As an experienced international advisory firm, we offer specialised advisory services in company restructuring, listing on US Capital Markets, and all aspects of going public.
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