Special Purpose Acquisition Companies (SPACs)

Definition

A special purpose acquisition company (SPAC) is a shell company that raises money in an initial public offering, typically holds the proceeds in trust, and has a limited time to merge with an operating company or return the money. SEC rules define it as a company whose business plan is to conduct a primary offering outside Rule 419 and complete a business combination within a specified time frame,^[2] which keeps it outside the escrow rules Congress directed for penny-stock blank check companies.^[1]

Federal law

A market and contract term. No Act of Congress defines it; the federal laws below apply as described.

1. Securities Enforcement Remedies and Penny Stock Reform Act of 1990, Pub. L. 101-429, § 508, 104 Stat. 931 (Securities Act § 7(b), 15 U.S.C. § 77g(b)). Directed the SEC to prescribe special rules for blank check companies issuing penny stock (Securities Act § 7(b), 15 U.S.C. § 77g(b)); exchange-listed SPACs are generally structured to fall outside this definition. Official text: govinfo.gov, U.S. Government Publishing Office.

Federal regulations

Rules issued by federal agencies under the laws above.

2. Special purpose acquisition companies: definitions (Item 1601 of Regulation S-K), 17 CFR 229.1601 (Securities and Exchange Commission). SEC definition of SPAC, de-SPAC transaction, and SPAC sponsor (2024 rules, Regulation S-K Item 1601). Official text: govinfo.gov, U.S. Government Publishing Office.
3. Offerings by blank check companies (Rule 419), 17 CFR 230.419 (Securities and Exchange Commission). SEC rule requiring escrow of proceeds and securities in blank check (penny stock) offerings. Official text: govinfo.gov, U.S. Government Publishing Office.