A SPAC (special purpose acquisition company) is a shell company that raises money in an IPO for the sole purpose of merging with a private company and taking it public.
SPAC shares are typically priced at $10, and your money sits in a trust until the SPAC finds a target — usually within about two years, or it liquidates and returns your cash.
SPACs boomed in 2021, then collapsed. Most companies that went public this way now trade below their $10 starting price, though a more disciplined revival began in 2024-2025.
Before a merger, you can usually redeem your shares for your share of the trust (around $10), which limits your downside while you wait.
A special purpose acquisition company (SPAC) is a publicly traded shell company created for one reason: to raise money and merge with a private business, taking it public without a traditional IPO. SPACs have existed since the 1980s, but they exploded in popularity in 2020 and 2021 before crashing just as dramatically, so understanding both the mechanics and the risks matters before you buy in.
eToro securities trading offered by eToro USA Securities, Inc. (‘the BD”), member of FINRA and SIPC. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Finder is not an affiliate and may be compensated if you access certain products or services offered by the BD.
The probability of a member receiving $3,000 is 0.028%. If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Members must fund their account with a minimum of $50.00 to qualify. The probability percentage is subject to decrease. Members are only eligible for the Stock Award promotion upon opening their first brokerage account; subsequent cash brokerage accounts are ineligible for the promo, including for members with multiple accounts.
Terms and conditions apply*. For 401k rollovers, existing SoFi IRA members must complete 401k rollovers via this link See full terms and For SoFi members without a SoFi IRA, a SoFi IRA must first be opened, and 401k rollover must be completed utilizing Capitalize via this link. SoFi and Capitalize will charge no additional fees to process a 401(k) rollover to a SoFi IRA. SoFi is not liable for any costs incurred from the existing 401k provider for rollover. Please check with your 401k provider for any fees or costs associated with the rollover. For IRA contributions, only deposits made via ACH and cash transfer from SoFi Bank accounts are eligible for the match. Click here for the 1% Match terms and conditions.
Must be a SoFi Plus member at the time a recurring deposit is received into your SoFi Active or Automated investing account to qualify. Bonus calculated on net monthly recurring deposits made via ACH and paid out as Rewards Points. See Rewards Terms of Service. SoFi reserves the right to change or terminate this promotion at any time without notice. See terms and limitations. https://www.sofi.com/sofiplus/invest/#disclaimers
Trade stocks, ETFs, options, futures and bonds all in one place
$0 commissions on stocks, ETFs and equity options, with low contract fees
Deposit or transfer $100,000+ to earn a 4% Match Bonus. Plus: Get a $100 transfer fee reimbursement on your first brokerage transfer of $2,000 or more. T&C apply.
What is a special purpose acquisition company (SPAC)?
A SPAC is a company that goes public with no commercial operations of its own. Its only purpose is to acquire or merge with an existing private company and bring it to market. Because investors who buy in usually don’t yet know which company the SPAC will target, SPACs are also called shell or blank-check companies.
Most SPAC shares are priced at $10 at IPO, on the general assumption that the price will rise once a target is acquired and starts trading. Whether that actually happens is another matter entirely and one we’ll cover below.
9:05
The SPAC boom, bust and revival
SPAC activity is highly cyclical, and the numbers tell the story. Issuance peaked in 2021, collapsed through 2022 and 2023, and has staged a more measured comeback since 2024.
Period
US SPAC IPOs (approx.)
Context
2021 (peak)
613
Around 63% of all US IPOs that year
2023 (trough)
31
Issuance nearly dried up
2024
57
Early signs of a revival
2025
138
Roughly 40% of US IPO deal count
The 2024-2025 rebound is widely described as a more disciplined era: experienced sponsors, stronger institutional backing and tighter regulation, but far smaller volumes than the 2021 frenzy.
How do SPACs work?
SPACs follow a distinct path to market. Here’s the process step by step.
1. The SPAC is formed
A group of investors, known as the sponsors, begins the process of forming the SPAC. Like any company going public, the SPAC must complete an IPO registration with the US Securities and Exchange Commission (SEC) before it can list on a US exchange.
2. The SPAC goes to market
After its IPO, the SPAC trades publicly under its own ticker symbol and the public can buy shares. The proceeds raised are placed in a trust or escrow account, where they stay until a deal closes.
3. The SPAC seeks a target company
The sponsors search for a private company to merge with. A target must typically be found within about two years, or the SPAC is liquidated and the money in trust is returned to investors. Notably, that search has been taking longer lately and by 2024-2025, most SPACs needed more than two years to complete a merger.
4. The SPAC merges with its target
Once a target is named and the merger (known as a “de-SPAC” transaction) completes, the combined company usually takes on the target’s name and a new ticker symbol. At that point you can hold your shares or sell them.
SPACs vs. traditional IPOs
SPACs and IPOs are often mentioned together, but they’re not the same. In a traditional IPO, a private company files extensive paperwork with the SEC, courts institutional investors and negotiates pricing, which is a slow, uncertain process. A SPAC flips the sequence: the shell company goes public first, then merges with a private business, which can be faster and offers the target more certainty over its valuation.
The gap between the two has narrowed, though. In January 2024, the SEC adopted rules designed to bring de-SPAC transactions closer to the investor protections of a traditional IPO.
Why do companies use SPACs?
Private companies often choose a SPAC because it can be quicker and more predictable than a traditional IPO. The target negotiates its valuation directly with the sponsor rather than leaving pricing to volatile IPO demand, and smaller or earlier-stage companies can reach public markets with less friction. The trade-off is dilution from sponsor shares and warrants, plus, since 2024, tighter disclosure obligations that have reduced some of the speed advantage.
How to invest in SPACs
You can buy SPAC shares through a standard brokerage account, but the process differs from buying an established stock:
Research the sponsors. When you invest in a SPAC, you’re largely betting on the sponsors’ judgment. Look into their track record: have they run SPACs before, and were those deals successful?
Open a brokerage account. You’ll need one to invest. Compare brokerage account options by features and fees to find the right fit.
Search for the ticker. Use your platform’s search or stock screener to find the SPAC by ticker or company name.
Submit your order. Enter how many shares you want and choose a market or limit order.
Wait. After investing, you’ll wait for the SPAC to announce a target, which can take two years or more.
Hold, redeem or sell. Before the merger you can usually redeem your shares for your share of the trust (around $10). After the merger, you can hold or sell like any other stock.
How do I find SPACs to invest in?
SPACs aren’t advertised the way traditional IPOs are, so staying informed is key. You can follow investment news, track SPAC-focused research sites, or look on exchange listings for ticker symbols ending in “U”, which is a common identifier for SPAC units.
Are SPACs safe to invest in?
SPACs carry real risks, and recent history makes that clear. In the 1980s they earned a poor reputation for illiquid penny stocks and pump-and-dump schemes. Regulation has improved since, but the 2021 boom exposed a new set of problems: on average, companies that went public via SPAC lost roughly two-thirds of their value afterward, and more than 90% of de-SPAC companies now trade below the $10 reference price.
The core risks to weigh:
It’s a blind bet. When you buy in early, you often don’t know which company the SPAC will acquire and you’re trusting the sponsors.
Your money can be tied up. It can take two years or more for a SPAC to close a deal, during which your funds sit in trust.
Post-merger performance is often poor. The combined company may underperform badly once it hits the market, as the 2021-2023 wave showed.
Dilution. Sponsor shares and warrants can dilute the value of your holding after the merger.
On the protection side, in January 2024 the SEC adopted rules (new Subpart 1600 of Regulation S-K) requiring fuller disclosure of sponsor compensation, conflicts of interest and dilution, and making the target company a co-registrant, which means it shares legal responsibility for the deal’s disclosures. The stated aim is to give de-SPAC investors protections closer to those in a traditional IPO. And because you can typically redeem your shares for your share of the trust before a merger, your downside while you wait is limited.
What happens after a SPAC merges with another company?
After a de-SPAC merger, the new company usually takes the operating company’s name and a new ticker. From there, you can hold or sell your shares like any other security but outcomes vary enormously, as two well-known examples show.
DraftKings went public in April 2020 by merging with Diamond Eagle Acquisition Corp. It’s become one of the rare SPAC success stories, growing into a multibillion-dollar company that has traded well above its $10 debut price.
Virgin Galactic shows the other side. The spaceflight company went public via a SPAC merger with Social Capital Hedosophia in 2019 and its shares topped $50 during the 2021 mania. They then fell sharply, and in June 2024 the company carried out a 1-for-20 reverse stock split just to keep its share price high enough to stay listed on the NYSE. Several other space SPACs did the same.
The lesson: there’s no reliable way to predict how a de-SPAC stock will perform. Before investing, check whether the SPAC has flagged a target industry or sector, which can at least hint at what you may end up holding.
Compare brokerage accounts
To invest in a SPAC, you'll need a brokerage account. Compare features and fees to find the right platform.
To invest in a SPAC, you’ll need a brokerage account. Explore account features and fees to narrow down your options.
8 of 8 results
What is the Finder Score?
The Finder Score crunches 147 key metrics we collected directly from 18+ brokers and assessed each provider’s performance based on eight different categories, weighing each metric based on the expertise and insights of Finder’s investment experts. We then scored and ranked each provider to determine the best brokerage accounts.
We update our best picks as products change, disappear or emerge in the market. We also regularly review and revise our selections to ensure our best provider lists reflect the most competitive available.
SPACs give retail investors a way to buy into a company as it goes public, and redemption rights limit your downside while you wait. But your money can be locked up for years, most de-SPAC companies have historically traded below their $10 starting price, and there’s no guarantee the merged company will succeed. The 2024-2025 revival is more disciplined than the 2021 boom, but the risks remain real. Compare brokerage account options to find a platform that fits how you want to invest.
Frequently asked questions
A SPAC, or special purpose acquisition company, is a shell company with no operations that raises money in an IPO for one purpose: to merge with a private company and take it public. It's also called a blank-check company because investors usually don't know which business it will acquire when they buy in.
In a traditional IPO, a private company itself files to go public and sells shares directly to investors. With a SPAC, an empty shell company goes public first, then merges with a private business (a "de-SPAC" transaction) to bring it to market. A SPAC can be faster and gives the target more certainty over its valuation, though the SEC's 2024 rules narrowed some of those differences.
SPACs are high-risk. On average, companies that went public via SPAC during the 2021 boom lost about two-thirds of their value, and more than 90% of de-SPAC companies now trade below the $10 reference price. Some, like DraftKings, have succeeded, but outcomes vary widely, so SPACs are generally best suited to investors comfortable with significant risk.
If a SPAC fails to complete a merger within its deadline (typically about two years) it's liquidated and the money held in trust is returned to investors, usually close to the $10 per share they paid.
In most cases, yes. SPAC shareholders typically have redemption rights, meaning you can hand back your shares for your pro-rata share of the trust (around $10 plus any interest) before a merger is completed, whether or not you support the deal. This is a key feature that limits your downside while the SPAC searches for a target.
A de-SPAC is the merger between a SPAC and its target company that takes the target public. Once it completes, the combined business usually adopts the target's name and a new ticker symbol, and the shell company effectively becomes the operating company.
SPAC issuance surged in 2020 and 2021, peaking at 613 IPOs in 2021, about 63% of all US IPOs that year. This boom was fueled by low interest rates, celebrity backers and retail enthusiasm. The boom proved unsustainable: many deals were low quality, post-merger performance was poor, interest rates rose and regulatory scrutiny increased, causing issuance to collapse in 2022 and 2023 before a more disciplined revival began in 2024.
Sources
Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.
Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga.
See full bio
's expertise
has written
67
Finder guides across topics including:
Copper is an industrial metal with many applications. Here’s what you should consider before investing.
Advertiser disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
