A SPAC is a blank-check company that raises money from investors to buy another private company and take it public. The word SPAC stands for Special Purpose Acquisition Company. SPACs allow private companies to become publicly traded without going through the traditional IPO process. After a SPAC finds and completes a deal, the acquired company becomes the new public company.
Investors put $500 million into a newly created SPAC called MergerCo Inc. MergerCo then searches for a private tech company to buy. After finding a suitable target, MergerCo purchases the tech company and merges with it. The tech company is now public and can trade on stock exchanges under a new ticker symbol.
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