Quora Answer: Are SPACs Good Long-Term Investments?

The following is my answer to a Quora question: “Are SPACs good long-term investments?” 

A SPAC, a special purpose acquisition company, is an entity with no commercial operations.  It is formed solely for the purposes of raising capital through an initial public offering in order to acquire or merge with an existing company.  SPACs are formed with a window to achieve that, which is measured in months, not years.  For example, the Singapore Exchange SPAC window is 24 months.  By their very nature, no SPAC is a long-term investment. 

If you are considering the continuation of the investment through the SPAC acquisition or merger, then this is a high-risk approach in hopes for immediate gain upon success.  There are no guarantees here, since there are many factors, including the protracted nature of such negotiation, competition from other SPACs, and even the cost of the general offer, which may be higher than your gain in share value.  SPAC mergers are often for companies that are less than three years old, and cannot list by themselves.  They are not an ideal vehicle for acquiring existing concerns with mature revenue streams.