How a SPAC Works: Investor Mandate Interview with a SPAC CFO
Special Purpose Acquisition Vehicle (SPAC) Investment Firm Investor Mandate Interview
Investors, sponsors and company owners who want a plain explanation of how a SPAC works and what its sponsors look for in a deal.
Said on the call
"It could all be lined up, but if you don't have the people to make it happen, it's not going to happen."
What you will hear
A SPAC starts with a sponsor who puts up the at-risk capital. Jeffrey describes the sponsor as covering costs such as underwriting, due diligence and reporting. An IPO then brings in shareholders, typically on NASDAQ. Jeffrey, the CFO of a SPAC, says these vehicles raise between 75 million and a couple of billion dollars.
Richard C. Wilson also asks about mandate and focus. Jeffrey says his SPAC already announced a letter of intent and covers North America. It is industry agnostic and looks for a strong management team and a company with growth potential. His main advice is to invest in people and check their track record before anything else.
From the source
- SPAC IPOs typically raise between 75 million and a couple of billion dollars.
- Jeffrey says shareholders typically pay $10 for one share and also receive a warrant. Terms vary by SPAC.
- Jeffrey's SPAC focuses primarily on North America and is industry agnostic.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Special Purpose Acquisition Vehicle (SPAC) Investment Firm Investor Mandate Interview. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around SPAC structure and sponsor promote, trust and redemption mechanics and public company reporting obligations. Do not use AI to write your own legal agreements.
The 5 big lessons
- Sponsors carry the at-risk capital. Jeffrey describes the sponsor as covering costs such as underwriting, due diligence and reporting. Sponsors often earn a promote if a deal closes, and terms vary.
- Shareholder money sits in trust. Jeffrey says investors typically buy a share for $10 and also receive a warrant. Unit terms vary by SPAC. Jeffrey explains that the money is held in a trust while the sponsor looks for a deal.
- Shareholders can vote or redeem. Jeffrey describes a vote at the end of the process where shareholders choose between staying in the new company or getting their money back.
- Backup capital covers redemptions. Jeffrey notes that redemptions can leave a funding gap. Sponsors often line up additional investors as backup, or the SPAC may end up with a smaller share of the merged company.
- Back the people first. Jeffrey says the number one lesson from 30 plus years is to invest in people. He suggests checking how long they have been in business, what they have done and what their returns have been.
- 1Sponsor funds the at-risk costs
- 2IPO brings in shareholders
- 3Shareholder money goes into trust
- 4Sponsor finds and merges a target
- 5Shareholders vote or redeem
Related questions
- How do I close a funding round?I close a funding round by focusing on investors who fit the opportunity and moving each interested prospect through clear, consistent follow-up.
- What documents do investors request during due diligence?Prepare a clear, organized package covering your operations, investments, compensation, team, and track record.
- How do I raise capital for my business?I raise capital by building a repeatable system for attracting the right investors, establishing credibility, and developing relationships before asking for money.
Questions about this video
What is a SPAC according to Jeffrey?
A SPAC starts with a sponsor who provides the at-risk capital and pays the costs. The sponsor then sponsors a company that holds an IPO to bring in shareholders.
What happens to investor money before a deal closes?
Jeffrey says investor money is held in a trust while the sponsor looks for a deal. At the merger, shareholders choose whether to roll into the new company or get their money back.
Why would a target company choose a SPAC?
Jeffrey says the target may be able to go public without going through an IPO itself. He mentions that owners may value flexibility around planning and keeping some control. A target should expect extra audit and reporting work.
Put this into practice with the data room checklist. See all private equity resources.
