The process of forming a SPAC starts by raising capital on a stock exchange. Generally, the common stock is priced at $10, and warrants are offered to purchase additional shares to attract investors. 

A trust account is used to hold the initial sale of stock until a suitable merger partner is found to complete the IPO process. 

The team behind the SPAC is responsible for identifying and negotiating a suitable business structure with a private entity to get the desired results. This process can become smooth and easy with the help of an accounting firm in Malaysia.

Once the investors are familiar with the target company, the initial share price of $10 changes, and the deal terms are decided accordingly. The share price can keep adjusting according to the developing situation. 

Generally, SPAC share prices will see huge growth after the announcement of the acquisition target. However, if the sentiment toward going public turns negative, the SPAC’s share price can decline as well. 

The announcement of the merger is followed by a “de-SPAC” transition period. There is typically a certain time period between the formal merger announcement and the close of the deal when investors decide the overall terms and handle legal matters.  

Once a deal is announced, the de-SPAC transition begins. There is usually a time between a formal merger announcement and the close of a deal (when investors vote on the deal), and other legal matters are resolved. 

Once a SPAC has raised money, it has about 18 to 24 months to identify and find a suitable merger partner. Companies that encounter difficulty in finding the best partner can rely on experts like a professional accounting firm in Malaysia for the best recommendation and outcome.  

Deals are not always good just because they are completed. An SPAC may become a full-fledged public listed company if a transaction is completed. The most frequent complaint about SPAC is that the sponsors prioritize the deal’s chances while disregarding its quality. 

Due to their post-merger share vesting, sponsors often walk away with a windfall. The goal of mergers should be to benefit all parties, but in reality, there is always room for doubt.

Moreover, keep in mind that the failure of SPAC can affect investors unequally. This does not imply that the SPAC teams driving unsuccessful agreements lacked thoroughness. 

However, because of how SPACs are set up, their team members—known as sponsors—are unlikely to suffer if that occurs. Their tiny investors are often disproportionately impacted.

SPACs use initial public offerings to obtain money for acquisitions. A Class A common equity share and a warrant make up the conventional SPAC IPO structure. A warrant allows its owner to purchase more shares of stock at a predetermined price in the future.

There is a possibility to exercise the warrants and get more common stock shares when the acquisition target is found and the deal is completed. The warrant is split off and trades independently from the SPAC shares a few weeks after the IPO is finished.

The SPAC management team is looking for a suitable acquisition target after the IPO. Since the IPO funds are invested in government bonds, the SPAC stock should trade close to that price throughout this time; nevertheless, during market selloffs, SPAC stocks are susceptible to falling below the IPO price.

SPACs may also trade above their IPO price if investors think management will find a strong candidate for an acquisition. SPACs have a certain amount of time to choose an acquisition target and complete the transaction. Typically, the phase lasts for two years.

The funds in the escrow account are refunded to the shareholders if the SPAC sponsor is unable to consummate an acquisition within the allotted time frame. 

The SPAC sponsors will formally declare any possible target companies they find. The announcement date is the day when the general public is informed of the proposed purchase.