A special purpose acquisitions company<\/a> (SPAC) is a company that goes public to raise money from investors and then uses the funds to acquire a private company within 2 years. Going public by merging with an SPAC is quicker and easier than going public through a traditional IPO. SPACs are \u201cblank cheque\u201d companies that exist on paper but have no commercial operations.<\/p>Direct listing: An IPO alternative<\/h4>
When conducting an IPO, companies usually have to work with investment banks to create and sell new stocks to the public. Through direct listings, companies bypass investment banks and sell stocks directly to the public. This is cheaper than traditional IPOs.<\/p>
How do IPOs work?<\/h3>
Before it goes public, a company is privately owned by shareholders like its founds and\/or other investment companies. When a company decides to go public, it must file a registration statement with the appropriate investment regulatory body.<\/p>
In Canada, this is the provincial or territorial regulatory body where a company is headquartered. (If not headquartered in Ontario, companies that plan to sell stocks in Ontario must also file with the Ontario Securities Commission.) In the United States, this is the US Securities and Exchange Commission (SEC).<\/p>
The registration documents are reviewed for compliance. Revisions may be made. Once approved, the process continues with the underwriters. These are typically the investment banks that manage the public offering and determine the IPO share price.<\/p>
While the company waits to go public, it will apply to be listed on a stock exchange like the Toronto Stock Exchange (TSX) or the New York Stock Exchange (NYSE). Companies must remain transparent to investors by regularly disclosing financial statements.<\/p>