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University of Pennsylvania Journal of Business Law




Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and becoming publicly traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target company takes the SPAC’s place on a stock exchange in a transaction that resembles a public offering. Also known as “blank-check” or “reverse merger” companies, this process avoids many of the pitfalls of a traditional initial public offering.

During late 2020 and 2021 an unprecedented surge in the popularity and issuance of Special Purpose Acquisition Companies (SPACSs) took place. John Coates, the SEC’s Acting Director of the Division of Corporation Finance, observed, “Concerns include risks from fees, conflicts, and sponsor compensation, from celebrity sponsorship and the potential for retail participation drawn by baseless hype, and the sheer amount of capital pouring into the SPACS, each of which is designed to hunt for a private target to take public.”

We discuss this popular approach to capital formation within the context of the securities issuance process and examine the robust market for SPAC issuance during 2020 and 2021. Financial reporting and auditing considerations are examined, along with regulatory concerns. Several examples of these offerings are provided. We believe this paper adds to the discussion and understanding of this widely employed financing mechanism.

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University of Pennsylvania Law School

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