Logo Logo

Technical Note: No Assets, No Products, No Business Plan: Risks Associated with Special Purpose Acquisition Companies

Abstract

A special purpose acquisition company (SPAC) is a blank check company that becomes incorporated and goes public with the intention of merging with or acquiring an undetermined company with the proceeds from an initial public offering (IPO). This process is often referred to as a "reverse IPO," as the company collects investor capital before acquiring, merging, or even selecting a target company. Because there are no assets or operations at the time of investment, investors are essentially wagering on the potential future performance of a management team. The optionality embedded within a SPAC allows public investors to enter into a unique and sometimes profitable investment vehicle that appears to have limited downside risk. However, SPACs actually pose numerous risks that may not be self-evident to all but the sophisticated investor. With a total of 228 SPACs raising $35.8 billion of capital since 2003, this increasingly popular investment vehicle warrants further discussion of these underlying risks.

Type

Case

Author(s)

David Stowell, Deepa Pai

Date Published

Citations

Stowell, David, and Deepa Pai. Technical Note: No Assets, No Products, No Business Plan: Risks Associated with Special Purpose Acquisition Companies. Case 7-209-252 (KEL455).

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more