Shell Companies are those currently in development that have no or minimal revenue stream. Includes capital pool, blank check, shell, and holding companies. This group also includes special-purpose acquisition companies (SPAC), which until recently was mostly an obscure vehicle to enter the publicly traded markets. Since these companies have short lifespans, the list of top companies in the industry are always changing.
Currently, most shell companies are SPACs, or Special Purpose Acquisition Companies, which are created with the purpose of raising funds through an initial public offering (IPO) with the goal of acquiring an existing company. The process typically works as follows:
- A group of sponsors forms a SPAC and takes it public through an IPO. Investors buy shares in the SPAC, providing the funds that will be used to search for and acquire a target company.
- The SPAC uses the funds raised through the IPO to search for a target company to acquire. This process has a limited time before the money raised must be returned to investors.
- Once a target company is found, the SPAC will negotiate a merger or acquisition agreement with that company.
- The SPAC will then hold a shareholder vote to approve the merger or acquisition. If the deal is approved, the SPAC will merge with the target company and the combined entity will become a publicly traded company.
- The SPAC’s sponsors and other insiders typically retain a significant ownership stake in the combined company, providing them with the potential for significant gains if the company is successful.
Overall, the SPAC process provides an alternative way for companies to go public, allowing them to bypass the traditional IPO process and gain access to public markets more quickly.
