Stocks of Blackstone, Carlyle Group and other publicly traded private-equity firms aren't the only way that individual investors that don't want to fork over what it takes to buy into a partnership can participate in this part of the smart money set. In fact, legendary investor Wilbur Ross has led PE into a little-known corner of the public markets known as special-purpose acquisition companies, which raise capital through IPOs that is then put to use in M&A. Of course, you and other buyers of SPAC shares may have no idea what the PE firms will end up buying, but at least you needn't bet the farm to bet alongside them.
Over the last year, more than half of the initial public offerings and registrations tied to special-purpose acquisition plays have been led by private equity players. And while PE investors have always had a connection to this quirky corner of Wall Street, the bond has never been this pronounced.
SPACs are investment vehicles created for the purpose of bringing private companies public, raising capital for the transactions via IPOs, with the proceeds placed in a trust designated for the transaction costs. The vehicles have a specific time period, generally 18 months to 24 months in which to close a merger. Should the SPAC fail to complete a transaction, the IPO revenues are returned to investors, who also generally have the option of voting against deals that don't make their grade, and have their investments returned.
August 16, 2016
Minh Q. Tran
http://about.me/minh_q_tran
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