The government is reportedly considering a regulatory framework for special purpose acquisition companies (SPACs).
| Utility: UPSC, JPSC, BPSC Prelims & Mains Section: Economy / Sectors / Investment Sector |
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What are SPACs?
- A SPAC, or a blank-cheque company, is an entity specifically set up with the objective of acquiring a firm in a particular sector.
- A SPAC aims to raise money in an initial public offering (IPO) without any operations or revenues.
- The money that is raised from the public is kept in an escrow account, which can be accessed while making the acquisition.
- If the acquisition is not made within two years of the IPO, the SPAC is delisted and the money is returned to the investors.
- Why are they attractive?
- While SPACs are essentially shell companies, a key factor that makes them attractive to investors are the people who sponsor them.
- Globally, prominent names have participated in SPACs.
SPACs in India
- Of the 1,145 IPOs by blank-cheque companies since 2009, 248 happened in 2020, 613 in 2021, and 58 in 2022 so far.
- The gross proceeds raised by SPACs amounted to over $83 billion in 2020 and $162 billion in 2021.
- The number for 2022 has crossed $10 billion already
