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Opinion
Chris Bryant

The Return of Market 'Silliness' Is Great for Ex-SPACs

Equity lines of credit can help neophyte public companies cover their costs. Retail investors should consider who'll really end up footing the bill.

Sometimes a safety net comes in handy.

Sometimes a safety net comes in handy.

Photo by AGUNG SUPRIYANTO/AFP via Getty Images

Many firms that have gone public by merging with special purpose acquisition companies are quickly running low on cash. To stave off disaster, newly listed startups are turning to an esoteric form of finance called an equity line of credit, or ELOC, which grants them the right — but not the obligation — to sell additional shares to a financial investor in return for hard cash.

It’s an efficient and low-cost method of raising money which, if used judiciously, can help plug a liquidity shortfall. But there are risks for the retail investors on whom the shares might ultimately be foisted.