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SPACs have become a popular vehicle for various transactions, including transitioning a company from a private company to a publicly traded company. “SPAC” stands for special purpose acquisition company-what are also commonly referred to as blank check companies. It is important to understand how to evaluate an investment in a SPAC as it moves through these stages, including the financial interests and motivations of the SPAC sponsors and related persons.

This bulletin provides a brief overview for investors of important concepts when considering investing in a SPAC, both (1) when the SPAC is in its shell company stage and (2) at the time of and following the initial business combination (i.e., when the SPAC acquires or merges with an operating company).

You may have heard the term SPAC recently referred to in the financial or other news. The SEC’s Office of Investor Education and Advocacy (OIEA) wants to educate investors about investing in SPACs.