Due to the current conditions of the global market, in particular the excess of liquidity, which had a considerable increase in the last year, a type of company existing in the world since 2003, but used on a smaller scale, is becoming increasingly popular with investors in the US and Europe, being responsible for almost half of the total value of all IPO’s held in the US in 2020. These are the Special Purpose Acquisition Companies, or SPAC’s, that are still in evidence in 2021 and promise to arrive in Brazil soon.
These companies are not operational and aim to raise investments for the subsequent acquisition of other existing and operational companies. The nickname “blank check” is because on the outset, no one knows which operational company will be the target of the acquisition of the SPAC. In these cases, market and investors only have information on the team organized for the administration (sponsors) of the SPAC and which field the operational company that will acquired belong.
Once the required investments are raised, if the acquisition of the operating company is not carried out within a certain period, usually 2 years, the investment amount must be returned to investors. If the acquisition is made, the shareholders of SPAC will become shareholders of the acquired company and the shares of that company will be traded in place of the shares of SPAC, which is then dissolved.
The main advantages of investing in a SPAC, as opposed to the realization of a traditional IPO, consist in the greater simplicity in the process of incorporating a SPAC, since not always will the operational company to be acquired meet the necessary requirements for an IPO, and also the lower investment vis-à-vis the IPO process, which facilitates access for small investors.
On the other hand, the risk presented by this type of investment is also higher. This caused great concern by the US Securities and Exchange Commission (SEC) in the last year, which stated that “it is never a good idea to invest in a SPAC just because someone famous is sponsor or investor”.
In Brazil, this type of investment does not yet exist, but the Brazilian Securities and Exchange Commission (CVM) opened a public consultation on the matter, to end in July this year, and Anbima (Brazilian Association of Entities of the Financial and Capital Markets) formed a study group with business lawyers, investment bank executives and managers to delve deeper into the subject.
Regardless of the regulations for setting up SPAC’s in Brazil, it is very likely that the Brazilian market will soon receive investments from these companies, since the country is drawing the attention of foreign SPAC’s that, according to SPAC Research, are looking for investments in Latin America for the year of 2021.
By Jessica Gatti Pizarro, associate at Candido Martins Advogados.