If you are struggling to come up with the money needed to expand your multi-million-dollar business, then you’ve probably heard the term SPAC come up more than once. What does SPAC mean? Should you hop on the 2020 bandwagon and rely on a SPAC to help you raise the money that you need to expand?
Continue reading to learn about one of the biggest investment trends of 2020.
What’s a Special Purpose Acquisitions Company (SPAC)?
Special purpose acquisition companies, sometimes known as blank-check companies, are built with one goal in mind: raising money to expand businesses or merging with another company.
A SPAC may be considered a blank-check company when it has recently gone public but doesn’t have an exact plan in place yet. The SPAC goes to potential investors and asks them to invest a certain dollar amount. These SPACs are then given this money (a blank check, if you will) to find the right company to merge with.
Solomon RC Ali Corporation, an DPO/IPO consultant, helps a diverse range of companies come up with the funds they need. These funds are then used for their expansion or future business plans.
How Does It Work?
Private companies go public with the help of the SPAC via an initial public offering (IPO). Once they become publicly traded companies, they give up a portion of their assets and profits to shareholders. They also have to report their financial and business information publicly to the U.S. Security and Exchange Commission (SEC).
The investors are pretty much asked to have faith in the process with the added promise of making them more money. The SPAC is essentially listing a company to raise money for its plans. Thus allowing it to provide the company with a ton of new capital through the investments. This can occur through selling stocks and liquidating equity or taking out a bond.
When the merger is confirmed, the investors are given a chance to stay and make more money or cash out their initial buy-in with added interest. If they choose to continue their investment, their shares are likely to get traded in for a higher dollar amount, thus making the investors more money.
These mergers and acquisitions can be stressful, especially if you are new to the industry. With the right financial consultant at your side, you don’t have to worry about handling these investors and negotiations on your own. This route offers you a simpler and cost-efficient plan for the future of your business.
Investment Trends for 2021
Why was this idea of a SPAC one of the top investment trends of 2020? SPACs raised more than $80 billion last year. Investors gave small businesses the money that they needed to expand or carry out business plans during the uncertain times brought about by the pandemic.
The trend doesn’t seem to be going away any time soon because SPACs promise a better future for struggling businesses via growth capital.Contact Solomon RC Ali Corporation today to learn more about our business consulting services and move forward in your own DPO/IPO proceedings.