Schedule a Free Consultation

facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
What Are SPACS, and Should I Be Invested in Them? Your Questions Answered Thumbnail

What Are SPACS, and Should I Be Invested in Them? Your Questions Answered

The financial press has generated excitement and controversy over the increase in SPACs, due to the large sums of money placed behind the revitalized investment approach. 

SPACs raised more than $80 billion through nearly 250 initial public offerings in 2020, accounting for more than half of the money raised through IPOs. By comparison, SPACs raised just $10 billion two years earlier.1

But, just because the investment decision is gaining popularity does not mean it’s right for everyone. The decision to invest in a SPAC will depend on your unique financial situation. To help provide some clarity, we’ve broken down how a SPAC works and the implications of investing in one.

What Is a SPAC?

The acronym “SPAC” stands for Special Purpose Acquisition Company. SPACs often receive attention for the large amounts of money invested into them, the celebrity names attached to them or a combination of both. For example, famous athletes and celebrities like Alex Rodriguez, Shaquille O’Neil, Kevin Durant and Paris Hilton are all involved with SPACs. 

SPACs seek investments for the sole purpose of purchasing another company. The companies chosen by SPACs for acquisition are typically underperforming but believed to contain potential success. SPACs thus use their funds to acquire an equity stake in the company, with hopes of tapping into its potential and increasing its value. Therefore, providing greater returns to shareholders. 

Investing in a SPAC

Understanding how SPACs work, and the implications of your investment, can provide you with some extra context. It’s always important to remember that SPAC’s, like all investments, involve risks. And such investment decisions should be based on your financial and personal goals. Consider the following factors when determining whether investing in a SPAC is right for you.

Investment Structure and Transparency

SPACs are also known as blank check companies. SPACs come public as a “shell corporation,” meaning they have no specific business plan or purpose. They look to acquire a private company and help it go public without going through the stages of a traditional initial public offering. Due to the structure of a SPAC, investors and sponsors won’t know which company the SPAC plans to acquire when they invest and must trust the SPAC’s management team to determine the right course of action.2

This can be an uneasy decision for investors since they won’t know where their money is going. After a company has been selected for acquisition, a SPAC will distribute either a proxy statement or information statement, depending on whether the SPAC needs shareholder approval before moving forward. If a shareholder does not like the selected business acquisition, they may choose to back out of the SPAC.


Blank check companies, and therefore, SPACs, must complete their acquisition within a specified time frame.2 But the speed of a SPACs acquisition period can fluctuate, with most completing around a year and a half.2 This means investors may not see a return on their investment until that time. 


In addition to standard investors, SPACs often have sponsors. Sponsors, according to the SEC, often have divergent interests and receive better equity terms compared to standard investors. SPACs can also request additional funding from sponsors during the acquisition process, resulting in reduced equity value for standard investors.

Return on Investment

ROI on a SPAC may depend on factors like the chosen company for acquisition and market performance. 

According to SPAC Insider, SPAC’s from 2009 to 2021 have shown an average annualized rate of return of 2.3 percent, with some returns as high as 28 percent, while liquidating roughly 10 percent of the time.3 

Like any other investment, there is inherent risk. As an investment choice, SPACs have become more popular over the years. However, understanding how a SPAC works, and the criticism surrounding them, is necessary before any investment can be made. Make sure to always consult your financial advisor before moving forward on any investment decision.

Click here to schedule a call with a BWC advisor today.


The information presented in this article is obtained from or based on sources believed to be reliable. BWC does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out of errors, omissions or changes or from the use of information presented in this article. The article does not purport to contain all the information that an interested party may desire and, in fact, provides only a limited view. Information presented does not constitute an offer to sell or a solicitation of an offer to buy any security.

All investments involve risk, including loss of principal invested. Past Performance does not guarantee future performance. Individual client accounts and performance vary. BWC does not provide tax advice.

About Beirne Wealth Consulting Services, LLC –

Beirne Wealth Consulting Services, LLC (“BWC”) is a privately owned, SEC Registered Investment Advisor with offices in Connecticut and Pennsylvania. BWC provides independent, fee-based investment management services and customized financial planning solutions. Our institutional business provides consulting expertise to defined benefit and defined contribution plans, endowments, foundations and non-profit organizations. Our private clients include high net-worth individuals and prominent families, many of whom bring complex wealth management challenges and multigenerational planning needs. For more information, please visit or give us a call today at 888-231-6372.

*Registration does not imply a level of skill or training.

© 2021 Beirne Wealth Consulting Services, LLC (BWC). All rights reserved. Reproduction or Use without permission is prohibited.