SPACs seen by some as less risky than blind poolsby Julia Neyman
Imagine the following investment scenario: You give a large sum of money to a seasoned principal, who uses it to take a promising company public. The principal, who has spent the last 30 years building his Rolodex on Wall Street, has two years to seal the deal.
If the deal happens, you could get a solid return when the company goes public. If two years pass and a deal hasn't materialized, you get your money back.
It's called a special purpose acquisition company (SPAC), and finance insiders say it's as close to a win-win as they've seen in awhile. They explain a SPAC as a cousin of the traditional blind pool offering, but not as susceptible to fraud.
Investors are safer because 99 percent of their investment is held in a trust until the deal goes. Principals take on more risk, but if they have solid Wall Street contacts, making a SPAC work is just a matter of finding a promising private company and filing all the paperwork to take it public.
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