Why Some Biotech Companies Are Turning to SPACs
A special purpose acquisition company (SPAC) is a shell company that raises money through an initial public offering (IPO) in order to take a company public through acquisition. Companies that want to go public usually go the route of an IPO; however, SPACs have risen in popularity recently due to their ability to get to market faster and surging demand from investors.
It can take months for a company to debut on the public markets the old fashioned way. The IPO process requires that companies work with underwriters and regulators to produce and approve a detailed investor prospectus. Additionally, the companies need to go on an "IPO roadshow" to pitch their shares to dozens of early investors.
On the other hand, going public via SPAC enables a company to get a deal done in weeks -- instead of months -- and only requires the selling company to negotiate with a single investor that controls the SPAC. Commonly referred to as a "blank-check company," a SPAC jumps through the pre-IPO hoops and goes public itself instead of the target company, which is ultimately acquired with the funds raised from the markets. More recently, biotech companies have started to embrace the SPAC structure too.
Source Fool.com
