---
title: "SPAC"
url: "https://mahouse.world/glossary/spac"
type: "glossary term"
topic: "Capital markets"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-10"
---

# SPAC

A SPAC — a special purpose acquisition company — is a listed shell that raises money in its own IPO with no business, holds it in trust, and has about two years to merge with a private company, which thereby becomes listed. The sponsor keeps a fifth of the shell's shares for almost nothing; IPO investors can redeem their cash at the merger vote. It took dozens of fintechs public in 2020–2021, most of them below $10 within a year.

**Also known as:** Special purpose acquisition company, Blank-cheque company, SPAC merger

## Key facts

- **Used at:** companies wanting a listing faster and with a negotiated valuation rather than an IPO's book-built one; at the 2021 peak, 613 SPACs raised $162bn in the US
- **Binding:** the SPAC's IPO documents; a merger agreement with the target; a shareholder vote with redemption rights; PIPE subscription agreements; the combined company's registration statement
- **Typical structure:** units of one share and a fraction of a warrant sold at $10; the cash held in trust; a sponsor "promote" of 20% of the post-IPO shares for a nominal sum plus sponsor warrants; a 24-month deadline (extendable by vote) to complete a deal or liquidate
- **Typical outcome in 2021–2023:** redemptions of 80–90% at the vote, so the trust delivered a fraction of the headline cash; the PIPE became the real funding; and de-SPACed fintechs traded at a median of well under $5 by 2023
- **Parties:** the sponsor, the SPAC's IPO investors (mostly hedge funds who redeem), the target and its owners, PIPE investors, and the underwriters paid on the IPO and again on the merger

## How a SPAC works in practice

A sponsor — a fund, an executive, a celebrity — raises $300m in a SPAC IPO: 30m units at $10, each a share plus a third of a warrant. The cash goes into trust. The sponsor receives 7.5m founder shares for $25,000. For two years the sponsor searches; when it finds a target it negotiates a merger at a valuation — say $1.2bn pre-money — and arranges a PIPE of institutions committing to buy shares at $10 to top up the cash. The SPAC's shareholders vote; each may redeem their $10 plus interest rather than hold shares in the target. In 2021 they mostly held; from 2022 they mostly redeemed, and targets that expected $300m received $40m plus the PIPE.

The economics are the sponsor's: 7.5m shares worth $75m at $10 for $25,000, whatever the target does after — a dilution the target's owners bear and often do not notice until the cap table is drawn. The target gets a listing, a negotiated valuation and whatever cash survives redemptions; it gives up the IPO's book-building, its curated shareholder base and, usually, any first-day pop — and inherits warrants that cap the upside and a shareholder register that sells.

The fintech de-SPACs of 2021 — SoFi, MoneyLion, Bakkt, Dave, Payoneer and others — are the record: some built businesses, most traded far below $10 for years, and the SPAC route closed for fintechs by 2023 as redemptions made the cash illusory.

## Example

A lending fintech agrees to merge with a $300m SPAC at a $1.2bn pre-money valuation, with a $150m PIPE at $10. At the vote, 72% of the SPAC's shareholders redeem: the trust delivers $84m. The combined company receives $234m against the $450m in the announcement, after $25m of fees; its owners hold 79%, the sponsor's promote 5%, the PIPE 10% and the remaining SPAC holders 6%. The sponsor's 7.5m shares, bought for $25,000, are worth $75m on listing day. Six months later the shares trade at $3.90: the PIPE investors are down 61%, the sponsor's promote is still worth $29m, and the fintech is a listed company with a quarter of the cash it planned and 14m warrants exercisable at $11.50 that will never be in the money.

## Common mistakes

- Treating the trust as committed capital when the shareholders can redeem it at the vote.
- Agreeing a valuation in a negotiation with the sponsor and expecting the public market to respect it.
- Ignoring the promote's dilution and the warrants' overhang in the cap table.
- Listing before the company has the reporting and controls a listed company needs, so the first missed quarter is public.
- For a licensed fintech, forgetting that the de-SPAC is a change of control the regulator reviews, on the SPAC's timetable.

## Related terms

- [Reverse Merger](https://mahouse.world/glossary/reverse-merger.md)
- [Private Placement](https://mahouse.world/glossary/private-placement.md)
- [Initial Public Offering](https://mahouse.world/glossary/initial-public-offering.md)
- [Direct Listing](https://mahouse.world/glossary/direct-listing.md)
- [Lock-Up Period](https://mahouse.world/glossary/lock-up-period.md)
- [Series D](https://mahouse.world/glossary/series-d.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov