Special Purpose Acquisition Company (SPAC) Overview

What Are SPACs in Finance?

By Lou Whiteman – Updated Jul 14, 2025 at 1:44 PM

Key Points

SPACs merge with private companies to take them public, often without specifying their target in advance.
Investing in SPACs can lead to significant returns when a merger target is revealed, boosting share prices.
Regulatory differences allow SPACs to project future finances, unlike traditional IPOs, adding risk.

A SPAC, or special purpose acquisition company, is another name for a "blank check company," meaning an entity with no commercial operations that completes an initial public offering (IPO).

After becoming a public company, the SPAC then acquires, or usually merges with, an existing private company, taking it public. Before completing a merger or acquisition, many SPACs provide no indication to investors about the type of company they plan to merge with or buy.

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Bundle of dollars and a bag that says SPAC on a seesaw balance.. — Image source: Getty Images.

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In effect, the "special purpose" of a SPAC is to bring a promising private company to the public investment market. Although SPAC strategies can be complicated, they tend to take less time to complete than traditional IPO listings and can be cheaper. The advisory fees associated with going public via a SPAC tend to be much less than the fees charged for a traditional IPO.

Early-stage companies can more easily comply with the requirements to merge with a SPAC than to complete an IPO.

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SEC (Securities and Exchange Commission)

The SEC, or Securities and Exchange Commission, is an independent government agency responsible for ensuring the integrity of the capital markets in the United States.

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About the Author

Lou Whiteman is a contributing Motley Fool industrials and financial services analyst covering aerospace, defense, transport, manufacturing, specialty finance, and bank stocks. Previously, Lou was a financial analyst and senior writer for TheStreet, a venture capital specialist for The Deal LLC, and a high school personal finance teacher. He holds a bachelor’s degree in communications from Loyola University Maryland and completed a fellowship at the ABA Stonier Graduate School of Banking.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.