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By U.S. law firm Seward & Kissel LLP.
I. SPAC and de-SPAC Background
A special purpose acquisition company, or SPAC, is a public company with no operations, products, or assets. Unlike a traditional public company's initial public offering (IPO), a SPAC's primary function is to raise capital that is deposited into a trust account and to seek out and combine with a private operating company to take that private company public, avoiding the traditional IPO process for the private company. Upon merging with the SPAC in the "de-SPAC" transaction, the surviving entity assumes the business operations of the target company and continues as a publicly listed company, with the proceeds held in the trust account being used towards funding the target company's business.
It is well known that the insatiable appetite for SPAC IPOs that dominated the U.S. capital markets in 2020 and the better part of 2021 waned in late 2021 and contracted further in 2022 and the first half of 2023. With the drop in SPAC IPOs also came a decline in the resulting initial business combinations, or IBCs, between the SPAC and the target operating company, with a peak of 200 IBCs closing in 2021, as compared to just one half that number in 2022 and just 40 de-SPAC transactions in the first quarter of 2023.
Additionally, unlike earlier de-SPACing transactions, m...................... To view our full article Click here
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