SPAC (n) acronym for Special Purpose Acquisition Company: a way to pay millions today, for the exciting investment idea someone promises to have tomorrow.
America still leads the world in one thing: inflating speculative bubbles using gibberish finance acronyms.
With the 2008 crash, the job was finding ways to explain Collateralized Debt Obligations, Credit Default Swaps, and other acronymic nightmares, under cover of which a fair portion of the world’s wealth vanished.
In the Fed-fuelled Covid-19 economy, there’s one acronym worth knowing now, in case of a bust later: SPAC, or Special Purpose Acquisition Company.
The SPAC is an IPO-for-IPOs. In essence, it’s a shell company, put together for the express purpose of raising money to acquire private companies that will eventually be taken public. Pick any absurd empty-package metaphor, and it’ll probably fit: investing in the plate one picks up on the way to a salad bar, in the tortilla you’ve been told will eventually contain the world’s best burrito, in the plain white paper and finger-paints you hope to dump in the crib of the next Rembrandt, etc.
Often called “Blank Cheque Companies,” the SPAC isn’t all new, but the mania has reached once-unimaginable heights. In 2021 already, 160 SPACs have raised over $50 billion, nearly matching last year’s record of $83.4 billion. An increasingly common element in SPAC announcements is the name of a celebrity, who’s enlisted to join a group that announces a plan to raise a massive sum of money for… something.
The SPAC’s cash requests are often wrapped in altruistic verbiage. An example being [one group] that believes purchasing decisions can act as instruments of change, and therefore wants to build brands to create “meaningful financial and societal value.” In their SEC filings they figure this will only cost $287 million.
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