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20.1: Introduction: Shells, SPACs, Reverse Acquisitions and Reverse or "Backdoor" IPOs:
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Abstract
Shells, SPACs, Reverse Acquisitions and Reverse or "Backdoor" IPOs: As the search for equity capital for development- stage entities intensifies, so the collective imagination of managers and financial intermediaries swells to meet the challenge. One of the newer and occasionally popular techniques for raising money is the so-called shell game. The trick is to organize a shell corporation-no assets, no business-and take it public. Because of the unfortunate connotations of the term "shell" in the financial arena, sponsors have developed a more glamorous and respectable label-Specified Purpose Acquisition Companies, or SPACs. The sole purpose of a Shell/SPAC offering is to raise a relatively modest amount of money and, more importantly, to get a number of shares outstanding in the hands of the public. Usually the shares are sold in units-for example, one share of common plus warrants at the current offering price. The sponsors of the shell corporation...
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