SOLUTION: ECON 373 UOM Economics Special Purpose Acquisition Companies Essay

Hi there! Please see attached. Let me know if you want any changes. I will be around. Thank you, enjoy your day 😀 Benefits Associated with the Emergence of SPACsParagraph 1•Special purpose acquisition companies have done very well in the past and seem not togo away anytime.•SPACs have been used as a vehicle by many companies to consolidate capital, and also,they have been considered essential to the growth of the economy (Alexander, 2017).•Many parties have benefited since the time that SPACs became operational•Also, Private companies trade at lower multiples than public companies, so SPACs haveoffered an opportunity to the private companies for a higher valuation (Richardson andLattman, 2007). There is a security guarantee with the SPACS since the funds raisedthrough the initial public offering are used as securities.Paragraph 2•SPACs have been considered beneficial and secure to the investors since the funds earnedin the IPO process are kept in a trust account as they wait to be invested in a targetcompany.•The maintenance of public funds in the trust account has instilled confidence in theinvestors, thus popularizing and increasing the preference for using SPACs over thetraditional IPOs.Paragraph 3•SPACs have been considered a vehicle to boost companies, especially private companies,to go public by enhancing their value and attracting investors on their behalf.•The traditional IPOs usually take two to three years, while the SPACs IPO process takesthree to four months (Maureen, 2007).•It means that the IPO process may end before some public buy sharesParagraph 4•Many investors would want to invest in a business that would give them returns within ashort time.•Direct investments have been considered less beneficial to SPACs since their IPO processis time-consuming, thus delaying returns from investors’ investments (Richardson andLattman, 2007).•Notably, the investors are not updated on the target company that the SPAC wouldultimately acquire. Therefore, their investment is not based on the historical operationalresults.Paragraph 5•The advantages and disadvantages of the SPACs determine the parties that benefit moreand their possibility of lasting long in the market.•SPACs have numerous advantages that make them to be considered beneficial to thepublic and the economy.•First, they involve few regulatory disclosures and scrutiny for target companies; thus,many companies consider them beneficial than direct listing or traditional IPOs.•They are also straightforward to the target company; therefore, they easily agree on afixed price since market prices do not control them.•Also, the SPAC investors have been pleased by their flexibility and faster liquidity(Alexander, 2020).•The money raised in the IPO process is kept in a trust account which assures the investorsthat their money cannot be lost.Paragraph 6•The disadvantages that have been associated with the SPACs have also raised concernsamong the investors, thus affecting their operations to some degree•Secondly, there is no guarantee that the target company will be run as expected since theyare not certain of the capital they would raise in the process.•However, the advantages of the SPACs seem to outweigh the disadvantages; thus, severalparties concerned, such as the target companies, investors, and sponsors, have consideredthem beneficial (Richardson and Lattman, 2007)….

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