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SPACs Are Hot Because They Are the ‘Poor Man’s Private Equity Funds’
Retail investors who buy the shell-company shares get a shot at fast-growing startups before they go public.
Illustration: George Wylesol for Bloomberg Businessweek
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SPACs—special purpose acquisition companies—are one of Wall Street’s hottest products. These publicly traded shell companies give tycoons and celebrities the capital to search for splashy one-shot deals.
In a 2016 paper, Lora Dimitrova of the University of Exeter Business School dubbed SPACs “the poor man’s private equity funds.” That’s because they give ordinary investors a way to participate in the purchase of a hot company before it goes public—a perk usually reserved for the wealthy.