Top Texas Firms Join BigLaw’s Fight Against Lawsuits Alleging SPACs are Investment Companies

Since early 2020, one of the most noteworthy developments in capital markets and global M&A activity has been the significant increase in both the number of initial public offerings of special purpose acquisition companies – aka “SPACs” – and the number of private companies combining with SPACs to become public companies (such combinations are commonly referred to as “de-SPAC transactions” or “de-SPACs”).

However, SPACs are not a recent invention; they have been a part (albeit, a small one) of the U.S. capital and M&A markets since the early 1990s. SPACs are “blank check companies” – companies that raise capital in an IPO solely for the purpose of acquiring one or more unidentified target businesses within a specified period of time, typically within 15 months to two years of IPO. When a SPAC identifies a company to acquire, the two effect the de-SPAC transaction and combine, with the resulting company becoming publicly listed. Until it effects a de-SPAC transaction, the SPAC holds the money raised in the IPO in a trust account invested in Treasurys and money market accounts.