What is a SPAC and why is it such a big trend in real estate?

SPAC stands for special purpose acquisition company and is created for the sole purpose of acquiring a private company and taking it public.

As a simplified example, a SPAC might complete an IPO and raise $300 million. It could then “acquire” a private company, which would then get the $300 million as growth capital. The combined company would then assume the name of the acquisition target and change its ticker symbol to reflect the change.

One key detail to keep in mind is that when a SPAC first goes public, it doesn’t have a business. It completes an IPO and puts the proceeds in a trust account. For this reason, SPACs are also commonly known as “blank check” companies. Investors are essentially giving the SPAC’s managers a blank check to go shopping for an acquisition target.

Matthew Frankel, CFP The Motley Fool