SPAC Key Participants
| Who Is Involved? |
SPAC Founders / “Sponsor”Executives with sector expertise and public market management / board experience.Private Equity / VC professionals who understand capital raising and M&A structure and process. Investors skilled at identifying undervalued companies in overlooked sectors |
SPAC IPO BuyersArbitrage hedge funds interested in value of the warrants and ability of management to close a transaction.Sector dedicated institutional funds looking for underappreciated companies in their space. Founders’ close network of colleagues, friends and family |
Seller of the AssetCompany, financial sponsor or other shareholders seeking exit or valuation mark Company seeking to raise equity capital / IPO |
Post de-SPAC InvestorMutual funds, hedge funds and retail investors looking for attractive public equity investment |
| What Is Their Investment? | Initial at-risk investment equals to 4%-7% of public offering size At-risk capital can be from outside source | IPO investors purchase units for $10.00 | N / A (transaction expenses) | Amount of shares bought in open market |
| What Do They Receive? | Warrants via initial at-risk investment for working capital Automatic base promote of 20% of shares outstanding at notional value |
1 share at $10.00 ¼ - 1 warrant struck at $11.50 Voting rights Redemption rights at acquisition. Downside protection until acquisition is consummated |
Cash and / or equity consideration. Potential contingent consideration / earnout |
Ability to buy shares at prevailing price |
| Motivation | Get deal consummated within 24 months Maximize IRR on sponsor investment | Maximize return by selecting teams which will provide greatest potential warrant value in shortest term | Growth capital Liquidity Acquisition currency | Establish equity position at attractive value with upside after accounting for founder dilution and warrant overhang |