Looser rules may allow the cash-rich, acquisition-hungry shell firms to succeed in London, but investors will need protecting
Basketball star Shaquille O’Neal does not at first glance seem to have much in common with the UK’s chancellor, Rishi Sunak. While the American sportsman has endorsed Pepsi, the British minister recently confessed to an addiction to Coca-Cola. But last week’s budget suggests they agree on at least one thing: both have jumped on the special purpose acquisition companies (Spacs) bandwagon – the hottest trend in finance.
Spac sponsors – often celebrities such as O’Neal – raise money for a “blank-cheque” company that lists on a stock market. The company then hunts for a privately owned business to invest in. A reverse merger offers the private company quick access to capital and a route to the stock market that is cheaper and easier than a traditional flotation. Once the process is complete, those who bought into the Spac can keep the investment or sell once the purchase is revealed.
