If you are seeking to find an investment in a substantial company that has recently gone public I suggest you take a look at SPACs. For the patient investor this could be a gold mine. Most SPACs are funded with between $20 million to $50 million. Their sole purpose is to acquire an established private company for their shell.

These deals usually involve experienced, wealthy, investors that are led by a qualified group of management professionals. The management group’s job is to find and review prospective candidates to acquire. They have raised a substantial amount of money in the bank and are ready to close on a deal as soon as they identify the right candidate.

SPAC stands for “Specified Purpose Acquisition Company”. This is a public shell that is organized to raise twenty plus million dollars for the purpose of identifying a specific private company to be acquired for the shell. The hope is that the management of the newly formed shell can identify a great private company and purchase it at a price that has a pre-public valuation. There are some serious conditions for that acquisition to be consummated. First of all, at least 80% of the money raised in the SPAC must be spent on the acquisition. Secondly, at least 80% of the investors in the SPAC must agree on the purchase of the private company. Lastly, if management does not identify a candidate to acquire within 18 months they have to refund the investors money, minus any expenses that were used to create the public shell.

The beauty part of this type of deal is that the small investor can watch from the sidelines until the SPAC shell consummates its deal with the private company. Investors must keep close tabs on potential companies that the shell is negotiating to purchase. There are sometimes several false starts before the purchase of a private company comes to fruition. Many SPACs have tried several attempts to purchase a private company only to see their offers rebuked. Only about half of these deals actually find a qualified acquisition candidate. However, the ones that are successful usually end up with a substantial public company. So keep an eye out for SPACs that are coming to market. You may get the opportunity to ride the coattails of an explosive stock.

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