Benefits for a Company to merge with a SPAC
| Timing |
Merger with SPAC3-4 months(a) |
Traditional IPO6-9 months(b) |
Direct Listing4 months(c) |
| Valuation and Execution Risk | Agreed upfront | High risk | Low risk |
| Capital Raising | Yes | Yes | No |
| Flexibility of Capital Raising | Yes. Can use mezzanine debt, senior debt, convertible preferred shares, etc. | No. Offering of common shares | N/A |
| Process | Limited interruption to management | Big stress for the whole organization | Limited interruption to management |
| Ability to provide forward guidance on business prospects | Yes(d) | No | Yes |
| Deal Structuring | Potential for a Company owner to retain upside through stock consideration (earn-out shares based on milestones). | Simple offering of shares at IPO valuation | N/A |
(a) From LOI to closing
(b) From initial prospectus drafting to close of IPO
(c) From first confidential submission to begin of trading (Spotify case, NYSE)
(d) Given the SEC rules regarding SPACs, shell companies and the disclosure of projections