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Money Stuff: SPACs Aren’t Always a Guarantee

Programming note: Money Stuff will be off tomorrow, back on Wednesday.

One big advantage of going public by merging with a special purpose acquisition company, instead of through a traditional initial public offering, is that the SPAC tends to offer more certainty of price and size. With an IPO, you announce “we’d like to raise $400 million at a valuation of $1.8 billion to $2.2 billion,” or whatever, and then you go out and market the deal to investors. Perhaps they love it and you upsize and reprice the deal, raising $500 million at a $2.5 billion valuation. Perhaps they hate it and you downsize and reprice to raise $300 million at a $1.5 billion valuation. Perhaps they super hate it and you end up pulling the deal, raising no money at any valuation. Most IPOs mostly go fine, but some go poorly, and if yours goes poorly that’s a serious black eye.