Uncovering The Potential Of SPACs In Indian Corporate Landscape
Sakshi Mahurkar, BBA LLB (Hons.), Symbiosis Law School, Pune*
INTRODUCTION
Special purpose acquisition companies [hereinafter “SPAC”] is a publicly traded entity with no commercial operations and with a two-year life span formed with the sole purpose of effecting a merger or ‘combination’, with a privately held business to enable it to go public. A SPAC is formed, by sponsors or experienced management teams, to raise capital through initial public offering (“IPO”) for the purpose of subsequently acquiring an existing operating company.
A SPAC is first created as a blank-check company whose management buys all shares and files required registrations. It raises funds through an IPO using units of shares and warrants and keeping the proceeds in a trust. After listing, it identifies a target business, announces the deal, and seeks shareholder approval. If approved, it merges and operates as the target company. The SPAC structure has become a careful balance between investor protections and an effective acquisition tool providing benefits to investors, sponsors and sellers of target businesses.
CASE ANALYSIS
Below given instances of SPACs help understand their practical application– § ReNew Power - RMG Acquisition Corp 20213
ReNew Power's $8 billion merger with RMG Acquisition Corp is largely the most significant SPAC transaction involving an Indian company and provides great insights. The transaction was successfully completed on NASDAQ, but revealed multiple limitations of the current regulatory framework in the process.
