SPACs—special purpose acquisition companies—have continued to be a topic du jour for securities and M&A lawyers throughout 2021. Indeed, SPACs have been booming all year. According to SPACInsider, there have been over 430 SPAC IPOs this year, on track to double 2020 and almost 10 times 2019’s total, and over 70 SPACs have announced business combination transactions.

As described in my March column, SPACs are entities formed to raise public investor capital in order to pursue a business combination with a private operating company. SPACs typically have a sponsor that backs the SPAC and supports its pursuit of a business combination. Sponsors usually receive an equity stake in the SPAC in the form of founder’s shares, often 20%, in exchange for their sponsorship. Between the time of investment and business combination, investor funds are held in a trust account and held in government securities and money market funds.

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