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Comment by creeble | Hacker News Reader

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creeble·

What's the difference between a SPAC and what used to be called a "reverse merger"?

I.e., when a smaller (but publicly traded) company, merges with a larger private company.

These used to be pretty common scammy ways to generate capital, usually through pump and dumps.

Same thing, just new acronym?

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> What's the difference between a SPAC and what used to be called a "reverse merger"?

A SPAC is created for the designated purpose to become a vehicle to take another company public. In a traditional reverse merger situation both companies are engaged in some regular business activity.

You make a SPAC sound even shadier than a reverse merger.

It's more an indication of how (irrationally) intent companies are on staying private well into their days as a global empire.

Why is it irrational to stay private? Going public constrains you with oversight and public shareholder demands.

If you can get access to capital without public shareholders, you absolutely should.

It seems like the only rational reasons to IPO are out of necessity (you need to raise the money, your employees will quit without liquidation, etcetera), or short-term greed. What other reason would you want to be public?

To me it sounds like all cards are on the table, as opposed to reverse mergers.

SPACs are just blank check, shell companies. Often reverse mergers would occur with junk penny stocks resulting in the pump-and-dump activities you mention. I think SPACs are “cleaner”...

My understanding is that a SPAC is more or less a corporation/fund that exists solely for the aim of doing a (or multiple?) reverse merger

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