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How do SPACs work?

November 20, 2019
GZERO Staff
How do SPACs work? It's Money In 60 Seconds with Betty Liu!

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What is a SPAC and how does it work?

So, SPAC is short for: Special Purpose Acquisition Company. That's when a company raises funds through an IPO and uses those funds to buy an operating business. You've seen SPACs grow in recent years and in fact, we just had one here. Virgin Galactic came public through a SPAC merger.

Are there other ways that companies can go public?

Yes, there are several ways that companies can go public. Of course, there's a traditional IPO, the initial public offering. And you just heard me talk about the SPAC merger. Now, there's a new way to go public these days, which is called a direct listing. That's when a company can go public and not have to raise capital. You saw Spotify do that last year. And this year we had Slack do a direct listing.

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