investment
The most common way this was done in the past was via a traditional IPO. In 2020, the SPAC exploded in popularity as a speedier vehicle to get a company to market.
SPACs, which stands for special purpose acquisition companies, are shell companies that raise money by listing shares on a stock exchange. The SPAC hunts for a target business to buy. They usually have two years to complete this search.
- Warrants - Getting in early - Experienced sponsors - New structures
1. Failure to find a target 2. Dilution risk 3. Greater regulation 4. Lackluster performance
What Is a Traditional IPO?
An initial public offering or IPO is the process of a private company offering shares for sale to the public. This is typically done through “listing” shares on a stock exchange, where investors can then buy and sell stakes in the company.
Benefits of Traditional IPOs
1. Get in early 2. Stable regulation
Risks of Traditional IPOs
1. New companies 2. Stock volatility
Both SPACs and traditional IPOs tend to be newer companies that have been less tested when it comes to their business model and public market reception, making them vulnerable to price volatility.