As a SPAC Sponsor, it is important to understand the intricacies of the SPAC structure. Take our quiz below to see how well you know SPACs
SPAC Sponsors provide the risk capital for the SPAC. How much do they provide?
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- 1-3% of the IPO amount
- 4-7% of the IPO amount
- 8-10% of the IPO amount
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The correct answer is 2: 4-7% of the IPO amount. This covers costs like underwriters, counsel, accountants, SEC filings, and more.
True or false: SPAC Sponsors can raise capital from sources outside the sponsor group.
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- True
- False
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See answer here
True. The potential for large returns for SPAC sponsors attract both family offices and institutions.
As a general rule of thumb, to close a business combination, the value of the acquisition must be:
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- At least 50% of the value of the cash in the SPAC
- At least the value of the cash in the SPAC
- At least 3x the value of the cash in the SPAC
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See answer here
3: At least 3x the value of the cash in the SPAC. Due to the dilution from the sponsor carry, an acquisition must be valued at the very minimum at 3x the value of the cash in the SPAC, but should generally be higher.
