Hope this is the right place for the question.

There are many articles on SPACs explaining how things work, so I'll cut straight to the question: I have read and heard people say that a SPAC deal can be good for the target, ie the acquired company, because, amongst other things, the target benefits from a cash injection.

And this is what I don't understand: an acquisition by a SPAC allows the shareholders of the target company to cash-out: the money raised by a SPAC is used to purchase the shares of the target, thus it is the shareholders of a SPAC that benefit from the funds flow. So, unless mistaken, upon merger the SPAC has used all its cash for the purchase, so logically there would be no cash left in the structure.

So at what time does a SPAC aquisition represent a cash injection for the target? Does it happen systematically or only on certain deals?

  • I don't think this question is specific to SPACs. De-SPAC transactions are conceptually the same as any other merger and acquisition.
    – Flux
    Apr 15, 2021 at 10:12
  • @Flux there might be parallels with M&A/PE/LBO but the question is not about the general case
    – Jean Monet
    Apr 15, 2021 at 12:42

3 Answers 3


So at what time does a SPAC aquisition represent a cash injection for the target? Does it happen systematically or only on certain deals?

It's common, not systematic, to have a funding event for the target company alongside a liquidity event for the target shareholders.

For example, the SPAC acquisition announcement for Joby Aviation puts great emphasis on the "gross proceeds" that will fund the target company rather than cashing out the target shareholders.


An IPO (and a SPAC acquisition is just a variant of this) can serve two purposes:

  1. Raising capital for the company by creating new shares and selling them
  2. Cashing out early investors by selling existing shares

To which extend each applies is specific to a concrete IPO.

  • Sorry looking for a knowledgeble answer on SPACs
    – Jean Monet
    Apr 15, 2021 at 12:43
  • 1
    There is nothing special about SPACs. There is no fixed rule or such that all the money goes to the target and nothing to early investors or vice versa. This is going to be different for every acquisition
    – Manziel
    Apr 15, 2021 at 12:53
  • Well "no general rule" / "depends on..", certainly. It's a valid reply to most any question, but IMO not very insightful. If you're saying the de-SPACing is the same as a classic IPO for the target, well, I'd be interested to know more. Is it really the case in practice? Do SPAC targets actually make a public offering of their shares and raise additional capital upon or immediately after their merger with the SPAC? (with some concrete examples, not generalities or hypotheticals I know those already) I'm not aware this is the case in practice, thus the question
    – Jean Monet
    Apr 15, 2021 at 16:14

A SPAC is basically a pot of money. This came from people who bought shares in the SPAC pre merger.

When the SPAC merges with a target the target gets that money in return for equity

The SPAC Shareholder have their SPAC shares converted into new shares in the resulting company, they aren't buying existing shares off shareholders in the target

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