Erscheinung:20.07.2021 | Topic Consumer protection SPAC shares: BaFin advises caution with risky investments
A number of European stock exchanges have recorded listings of SPACs (special purpose acquisition companies) in recent months. SPACs are special purpose acquisition companies that raise capital through a private placement or an initial public offering in order to invest this capital in a business combination with an as yet unlisted company. In this way, SPACs allow retail investors to make investments that are normally only available to financially strong risk capital providers.
However, anyone wishing to invest in SPACs has to accept considerable risks. In particular, the opportunities and the risk of loss of capital associated with an investment in SPAC shares are very difficult to assess. Before buying such shares, retail investors should familiarise themselves with the business model and determine whether they are prepared and able to bear the risks that investing in a SPAC entails.
This should be seen against the background that SPACs are shell companies without operating activities. For this reason, they have no operating history and cannot provide details of their position in relation to competitors or a specific future strategy. Their business purpose is to find, within a specified period, a target company that will agree to a business combination with the SPAC as a way to achieve a listing indirectly. If that does not succeed, the SPAC will have to be liquidated. In such a case, retail investors will typically only be reimbursed for a part of their invested funds, once costs have been deducted. Depending on the particular target company and the terms agreed upon for the business combination, the risks extend as far as a possible loss of capital, even if a business combination is completed. Further details can be found on BaFin's website.
