The first five IPOs of 2008 have priced, and four of them have some curious things in common: no revenue, no history and no operations. That's because they're special purpose acquisition companies, or SPACs. Sometimes called "blank-check" companies, SPACs are corporate shells formed in order to make buyouts. Although they don't reveal their buyout targets at the time of the offering, they do have to put the candidates up for the approval of at least 70% of shareholders. If the buyout doesn't go through, shareholders get a refund.
This unique investment model has grown explosively in the past few years. According to Renaissance Capital, in 2003 just one SPAC came public. But last year 65 of them hit the boards, raising $11.7 billion. The 2008 pipeline already is looking to beat that.
One important SPAC player is Mark Klein, former chief of Ladenburg Thalmann
IBD: SPACs are often called "blank-check" companies, but apparently they're a little different from traditional blank-check companies. Can you explain that?
Klein: There's obviously been an evolution of the product.
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