De-SPAC: A Guide to the Process
A de-SPAC, also known as a reverse merger, is a process by which a special purpose acquisition company (SPAC) merges with a private company to take it public.
The SPAC raises money from investors by selling shares in its initial public offering (IPO). The SPAC then uses the proceeds from the IPO to acquire a private company. The private company then becomes a public company through the merger with the SPAC.
Since 2020, there have been over 1,000 de-SPACs.
There are a number of advantages to de-SPACing. First, it is a faster way to go public than a traditional IPO. Second, it gives private companies access to the public markets without having to go through the traditional IPO process. Third, it gives private companies access to the capital they need to grow their businesses.
However, there are also some disadvantages to de-SPACing. First, there is a risk that the private company will not be able to meet the expectations of investors. Second, there is a risk that the private company will not be able to maintain its growth rate after it goes public. Third, there is a risk that the private company will be acquired by a larger company before it has a chance to grow on its own.
Overall, de-SPACing is a new and innovative way to go public. It offers a number of advantages to private companies, but it also comes with some risks.
The timing of a de-SPAC can vary depending on a number of factors, such as the market conditions and the specific requirements of the SPAC and the target company. However, typically, de-SPACs are conducted during times when the stock market is strong and when there is a high demand for new investment opportunities.
The following are some of the documents that are typically filed in connection with a de-SPAC:
- The S-4 registration statement
- The definitive agreement
- The proxy statement
- The prospectus
The de-SPAC process typically begins with the SPAC identifying a target company that it believes would be a good fit for its business model. The SPAC then conducts due diligence on the target company and negotiates a definitive agreement. Once the definitive agreement is signed, the SPAC files the S-4 registration statement with the Securities and Exchange Commission (SEC). The SEC reviews the S-4 registration statement and typically takes 3-6 months to approve it. Once the S-4 registration statement is approved, the SPAC can begin soliciting votes from its shareholders on the merger. If a majority of the shareholders approve the merger, the SPAC and the target company will merge and the target company will become a public company.
The costs of a de-SPAC can vary depending on a number of factors, such as the size of the SPAC, the complexity of the transaction, and the legal fees incurred.