Future of SPACs and How They Are Creating Value in Capitalism
Special Purpose Acquisition Companies (SPACs) have managed to attract a significant amount of attention in the last few years.
Business experts, multinational organizations, and even small-scale companies are paying special attention to SPACs because they have emerged as a reliable alternative to traditional IPOs.
A major reason why SPACs have become so popular is that they address the issues involved in IPOs, such as excessive delays and too much scrutiny.
Experts such as accounting firms in Malaysia can facilitate companies in the entire process of going public with the help of SPACs. Keep reading to learn all about SPACs and how they are contributing towards capitalism.
Major Advantages of SPACs
SPACs offer a number of benefits to companies that want to go public. A traditional IPO process can take anywhere from six months to over a year. On the other hand, if you choose to go public through a SPAC, you can cut down the time to a few months.
Moreover, SPACs provide a great opportunity for the owners of the target company to negotiate a suitable price and conditions for selling to a SPAC within a limited time window. It makes the overall deal highly beneficial for the company.
There are many challenges that a business can face, even after going public. Therefore, being acquired or merged with a SPAC is useful because most of the SPACs are sponsored by experienced financial investors and business executives.
As a result, the target company is able to get access to the vast experience, expertise, and skillset of these experienced executives.
It is also important to note that the global pandemic has contributed a lot to the massive popularity of SPACs. Statistics also corroborate the fact that the popularity of SPACs has continued to rise since 2020.
Concerns About SPACs
While there is a long list of benefits of going public through SPACs, there are some concerns about SPACs as well. A lot of financial experts have concerns about the long-term feasibility and evolution of SPACs as an investment vehicle.
A major concern is that the SPACs are not efficient enough to provide significant returns to the stakeholders. Moreover, there is still a great room for further development of the SPAC infrastructure related to dealing with institutional and retail investors.
There also needs to be clear guidelines about the consequences if a SPAC does not merge. Generally, SPACs have a specific time frame to merge with another organization within 18 to 24 months and close the deal.
However, if a SPAC is unable to merge during this time, it can liquidate, and all of the funds can be returned to the investors. To make sure that SPACs merge during the right time frame, these rules need to be put into place more strictly.
Maximizing the Benefits of SPACs
A number of policies, suggestions, and recommendations from experts are being discussed around the world to maximize the benefits of SPACs.
Some experts have indicated that lockup rules for sponsors should be in place for the entire lifecycle of an SPAC to make it safer. It will encourage the sponsors to put more money towards SPACs.
Moreover, it has been suggested that sponsors should invest bigger stakes in their SPACs. It will play an integral role in offering better incentives through diligence and research conducted by the sponsors.
The market is also adapting to such policies, due to which some sponsors have already agreed to longer lockup periods.
Individual Investment in SPACs
Generally, it is not possible for the majority of retail investors to invest in privately held companies. Nevertheless, SPACs allow public investors to partner with investment professionals and accounting firms in Malaysia to invest in a wide range of companies.
Exchange-traded funds (ETFs) investment in SPACs has increased in recent times. Such funds are a combination of companies that want to go public by merging with a SPAC. It also facilitates the SPACs that are searching for a particular target to go public.
However, just like with all types of investments, there are varying levels of risk involved in SPAC investments as well.
Conclusion
Overall, there are certainly some risks involved in SPACs, but these risks outweigh the various benefits you get from SPACs.
A professional accounting firm in Malaysia can help you throughout the process of forming a SPAC and taking your company public via SPAC instead of the traditional IPO. It will help you save a significant amount of money and time.
Moreover, experts will give you the best advice to complete the process efficiently to maximize the benefits of SPAC.
