The acronym Spac stands for "special purpose acquisition company". In free translation, it is a special purpose acquisition company, which is nothing more than a company that receives a blank check from investors to carry out an acquisition of another company.

This type of company is not new. As recently as 2008, an article in Capital Aberto said that Spacs "were the biggest new sensation among managers looking to raise money on the stock exchange to invest in high-risk companies. By the end of that year, the number of initial public offerings (IPOs) of Spacs was 36% of all such transactions in the US.

Publicly traded companies, Spacs seek to raise funds from investors to buy unlisted operating companies. A Spac is not an operating company, but rather a holding company that seeks to raise funds for an acquisition. In general, the target company is not disclosed in the IPO, but the branch of activity or type of company that is intended to be acquired may be disclosed.

Given these characteristics, Spac's creators and management team - known as sponsors - become the central point of relevance of these vehicles and of disclosure of information in the offering prospectus.

Typically, a Spac will offer to the public a security (unit), composed of shares and rights to acquire shares issued by the Spac in the future, under predetermined conditions. As a rule, the sponsors will own shares in the Spac, acquired at a discounted price in relation to the IPO, as a form of alignment of interests and remuneration for the creation of the Spac.

With the funds raised, Spac must acquire a company within a specified period, usually 18 to 24 months. The investors' funds are held in a fiduciary account. If the acquisition does not take place, the funds are returned to the holders of Spac shares, in proportion to their participation.

The acquisition occurs through a business combination that results in Spac's investors holding securities of the acquired company. With the acquisition defined, investors can redeem their units prior to the completion of the transaction and eventually vote on the transaction.

Time is the most obvious advantage of Spacs. A traditional IPO takes an average of 12 months; that of a Spac can take three or four months.

In addition, the issue price in the IPO of a Spac is usually fixed, without the need for pricing procedures, which can generate high volatility. What will matter is the acquisition value of the target company, negotiated by the management of the Spac, which would have more expertise and malleability to establish fair terms and conditions than in a traditional IPO.

The level of investor information at the time of the IPO of a Spac is more restricted than that of a traditional company. Except for the technical and legal characteristics of the securities issued, the most detailed information will be about the sponsors and members of the Spac's management, since there is no definition of the target company.

The costs and fees of a Spac can also be difficult to understand. In addition to the normal expenses of making an offering and maintaining a public company, the sponsors of the spac have a stake in the company and economic benefits in making the initial acquisition. These mechanisms, structured in part to align interests, may represent material dilution of the IPO investors of a Spac in the acquired company.

In Brazil, there are no regulations on Spacs. However, in a recent public hearing on public offering rules, the CVM explained that this type of operation is not forbidden in Brazil and asked for comments from the market on the target public for these offerings. The expectation is that the IPO of Spacs, or similar operations, will soon have clearer rules in the country.