What it means
SPAC
How does a SPAC work?
- The SPAC goes public. It raises money from investors in an IPO, and the funds are held in a trust account.
- It searches for a target. The sponsor looks for a private operating company within a limited window.
- It announces a deal. The SPAC and the target agree to a business combination, often alongside additional financing.
- Shareholders vote and may redeem. The SPAC seeks approval through a proxy statement, and investors can redeem their shares for their investment plus a pro rata share of interest earned on the trust.
- The merger closes. The target becomes part of a publicly traded company.
SPAC or traditional IPO?
| SPAC merger | Traditional IPO | |
|---|---|---|
| Route to public markets | Merger with a listed shell | Direct offering of the company's own shares. See Form S-1 |
| Pricing and negotiation | Negotiated with the SPAC sponsor | Set through the roadshow and book-building. See roadshow |
| Projections | Often discussed publicly, under rules that now limit protections | Typically limited in the prospectus |
| Key uncertainty | Shareholder redemptions | Market demand at pricing |
What did the SEC change in 2024?
On January 24, 2024, the SEC adopted final rules for SPACs, shell companies and projections. The rules are meant to align protections in de-SPAC transactions more closely with those in a traditional IPO. Among other things, they require additional disclosure about sponsor compensation, conflicts of interest and dilution, make the target company a co-registrant on the registration statement for the transaction, and update guidance on projections in SEC filings. Details and compliance dates are in the SEC's compliance guide, and counsel should confirm what applies to a deal.
What does communications involve?
- A defensible narrative. A clear story about why the combined company is worth backing. See key messages.
- Disciplined statements. Care with projections and forward-looking language, reviewed by counsel.
- Redemption awareness. Messaging that addresses investor concerns about redemptions and value.
- Quiet period and publicity rules. Coordinate with counsel on what can be said and when. See quiet period and IPO communications.
- Stakeholder briefings. Employees, customers and partners should hear major news from the company. See media training.
What should communications teams avoid?
- Overpromising on projections or timelines.
- Inconsistent messages across filings, press and social channels.
- Publicity that could be seen as promoting the securities outside the rules.
- Ignoring the heightened investor and regulatory skepticism around SPAC deals.
This is general information, not legal advice.
Frequently asked questions
What does SPAC stand for?
Special-purpose acquisition company.
What is a de-SPAC transaction?
The merger between a SPAC and a private operating company that takes the private company public.
Why is it called a blank check company?
Because investors put money in before the SPAC has identified the target. Legal definitions of "blank check" can be technical, so ask counsel.
Do SPAC mergers still happen?
Activity slowed considerably after the market's peak, but SPAC transactions still occur. Check current market conditions.
Why do projections matter so much in SPAC deals?
The SEC's 2024 rules aim to give investors in de-SPAC transactions protections closer to a traditional IPO, so forward-looking claims draw close attention.
Related terms and services
Form S-1, roadshow, quiet period, IPO communications and the Investor Relations glossary. See 5W's SPACs and IPOs practice and Financial Communications for Pre-IPO Companies.
Sources
- SEC: Special purpose acquisition companies, shell companies and projections, small entity compliance guide
- Mayer Brown (via Mondaq): SEC adopts final rules relating to SPACs, shell companies and projections
- FBT Gibbons: SEC adopts final rules relating to SPACs
By the 5W Editorial Team. Every 5W article is reviewed by a human editor before publication. Updated October 28, 2026.