What are SPACs?: 5 Articles That Explain Wall Street’s Latest Obsession

Shaquille O’Neal has a SPAC. So does former Speaker of the House Paul Ryan and Jay-Z. Over the past year, investors have poured tens of billions of dollars into these buzzy investment vehicles. After pulling in a record $83 billion in 2020, SPACs raised $26 billion in January alone, almost half of that coming from everyday retail investors. But what exactly are SPACs, and what is the frenzy all about?

SPACs— which stands for special purpose acquisition company—are shell companies that don’t make or sell anything. They exist for the sole purpose of raising money from investors by going public and then using those funds to eventually acquire an actual company. SPACs have been dubbed “poor man’s private equity” because they give average investors the opportunity to buy into startups before they go public. But critics warn that SPAC-mania is a bubble primed to burst.

Read on to learn the details of how SPACs work, what companies and investors get out of them, and the arguments for and against SPAC speculation.