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Opinion
Matt Levine

SPAC Suit Leads to SPARCs

SPACs as investment companies, SPARCs vs. SPACs and insider trading on comparable companies.

One basic way to invest is that you put your money in a pot, and a bunch of other people put their money in the pot, and one person manages the pot of money and uses it to invest in stuff. If the stuff she invests in goes up, you, and the other people who put money into the pot, make money. (If it goes down, you lose money.) If the stuff goes up, and usually also if it goes down, the manager gets paid somehow — fees, salaries, bonuses, a share of the profits, a share of the pot, etc. — for doing the work of picking the investments.

This general description covers a lot of things. In a sense it covers every public company. Loosely speaking Tesla Inc. raised a pot of money from investors, and Elon Musk — its manager — invested that pot of money in factories and stuff to make cars, and the value of those investments went up, and so Tesla’s shareholders made money and Musk was compensated in various ways (mostly shares and options) that made him very rich.