The SPACtacular Rise of the Special Purpose Acquisition Company: A Retail Investor’s Worst Nightmare

Journal of Corporate Law Studies Forthcoming

University of Cambridge Faculty of Law Research Paper No. 32/2021

52 Pages Posted: 23 Nov 2021 Last revised: 28 Jan 2022

See all articles by Bobby V. Reddy

Bobby V. Reddy

Faculty of Law, University of Cambridge

Date Written: October 1, 2021

Abstract

Special Purpose Acquisition Companies (SPACs) are non-operating entities seeking public listings with the sole intention of subsequently acquiring other companies. Once a target has been acquired, the SPAC de-lists and the newly enlarged group reapplies for listing as a, now publicly-owned, operating entity, thereby streamlining the process to IPO for the target. SPACs have surged in the US recently, with SPAC sponsors making concerted efforts to attract not only institutional, but also retail, investors. With a view to invigorating SPAC activity in the UK, new regulations have been introduced that will enable UK SPAC sponsors to mimic the structure of US SPACs. However, in this article, it will be discussed that unlike the more benign nature of traditional UK SPACs, the typical US-style SPAC is simply a financial instrument for institutional investors built upon the investment of retail investors, and promoting such an evolution in the UK may be misguided.

Keywords: SPACs, Special Purpose Acquisition Companies, Listing Rules, IPO, Retail Investors, UK Listing Review, Blank Check Companies, Reverse Mergers

JEL Classification: G18, G30, G34, G38, K20. K22

Suggested Citation

Reddy, Bobby, The SPACtacular Rise of the Special Purpose Acquisition Company: A Retail Investor’s Worst Nightmare (October 1, 2021). Journal of Corporate Law Studies Forthcoming, University of Cambridge Faculty of Law Research Paper No. 32/2021, Available at SSRN: https://ssrn.com/abstract=3968983 or http://dx.doi.org/10.2139/ssrn.3968983

Bobby Reddy (Contact Author)

Faculty of Law, University of Cambridge ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

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