Capital markets: IPO of future

In a traditional IPO, the target company is subject to a time-consuming process, which includes roadshows, launch meetings, and a careful review of the company’s financial statements and other mandatory regulatory disclosures. This process is simplified in a SPAC where the funds are first deposited in the kitten, without even identifying the target.

Sidharrth Shankar and Madhurima Mukherjee

The year 2020 saw stellar capital market performances around the world. One of the most interesting stories in the financial market was the resurrection of “Special Purpose Acquisition Vehicles (SPAC)”. In the changing world of equity capital markets, nothing is more captivating than the thought of a quick and (relatively painless) fundraiser. However, IPOs remain the predominant method of fundraising from the public.

Like all Wall Street idioms, SPAC is also complex sounding jargon, which simply means a “blind pit of money”. In fact, SPACs are often colloquially referred to as “blank check companies”. A SPAC is a special purpose acquisition company established for the purpose of raising capital through an IPO to use the funds thus raised to acquire an operating business.

In a traditional IPO, the target company is subject to a time-consuming process, which includes roadshows, launch meetings, and a careful review of the company’s financial statements and other mandatory regulatory disclosures. This process is simplified in a SPAC where the funds are first deposited in the …

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