As per New York time in its article dated 27th Feburary,2023 quoted that SPAC
is "a new way for the rich and recognized to flex their status and wealth".
Corporate sectors involved amalgamation, demegers and acquiring of companies and
this consist of specific method to perform such acquiring. SPACs or Special
Purpose Acquisition Company whose purpose is to raise investments through
initial public offering (IPO).
The money is raised in form of funds in order to acquire one or more unspecified
businesses that are identified after the offering.The paper below would deal
with benefits of the same with startup and private companies .
It is not a new concept but helps in acquisition within a chosen space thats
makes them a great funding for startups and bringing in new minds for the times
ahead. It plays a major role in private companies and sponsors going public .The
following can be done with or without intention but the intentions are not
disclosed so that it does not effect the public offering.
It has gained popularity in recent years as it gives the company the growth
potential needed as soon as the deal is closed with SPACs..The paper deals with
articles that provide learning related to the same.
Startups and the problems:
Startups are the growing trends of today and the trends thus revolve solely
around explicit new ideas and work of bringing in new techchnology into the
industry market.The major key to the bringing in of such companies lies on the
problems that has been faced by startups and private companies.The problems and
challeneges are majourly related to finance management.
The cost exceeding the revenue and thus the poor financial planning is major
cause of startup failure.The excitement of a new business and making the
investment without a forethought.It is essential for business to prepare for
critical situations . Secondly, the ineffective marketing stradegy which plays a
major role in growing of startup, in this the startup invest more on marketting
fads that can lead to one spenmding more on these strategies than the sales they
As similar to startups the private companies either small scale or large scale
mobilize funds from banks,from market and through sale of entites for their
expansion.The ratio of profit is low to that of expenditure in private
companies.The government diversification of not let these companies participate
in heavy load or infrastructure companies has also lead to decline of sector
which provides definite margins of profit and those the cash and funding to
these companies decline leading to inadequate growth.
Recent trends related to SPAC
The accusation of Yatra by Treppin 3 Acquisition Corporation as well as the
reverse merger of Videocon Digital from Silver Eagle Acquistion Corp.
Benefits of SPACs
The benefit of spac is not only on the price but also the time of the company in
which it is invested. When comparing SPAC to IPO, the initial public offering
involves a major time period between 6 months to an year while SPAC can go
public within a few months providing less time wastage and easy investment.The
timeline thus stands specific.
Secondly if we consider the price,the company that is acquired can negotiate the
price for the acquisition providing the best possible reason for the using such
method instead of IPO.
The SPAC has less regulatory process. It is already as method that raises funds
for any such unspecified business and only a time frame is provided for
acquisition of company not any other regulation is suggested under such method.
During the pandemic of COVID 2019,the economy declined under the same and it was
a major requirement for transparency and timely execution of IPO and thus
establish merger activites.
The market under which the company is listed in traditional IPO is the local
exchange market and thus providing the ambit of market to be less and under the
SPAC mechanism, the market in whiuch the following are listed is the US exchange
Thus it can be suggested that SPAC as per growing times is a major benefit than
other traditional IPO.