Characteristics of special purpose acquisition companies as a new challenge in European markets

Abstract

Special Purpose Acquisition Company (SPAC) is a special type of public listed company available to investors in financial markets, and was formed with the aim of investing in one or more existing operating companies after raising capital. This paper provides an overview of academic and financial literature on SPACs, describes their characteristics, advantages and risks of using SPAC as a form that does not offer services and does not conduct business operations, but is formed only for the purpose of acquisition of target companies. The paper focuses on the analysis of the impact of these forms of short-term investments on private companies, SPAC managers and investors. The paper further examines whether the impact of SPACs on European financial markets can be expected to grow. Authors' findings show that, beside limitations for growth of European SPAC number, there is evident interest among European startup companies to go public through SPACs.