Question

Q. Recently SPAC (Special purpose acquisition company) was in news. Which of the following statements correctly describes the SPAC?

• A. It is an entity set up by RBI to acquire non-performing assets of banks.
• B. It is a holding company set up by the Government of India, in which the government will transfer all of its shares of Public sector enterprises (PSUs)
• C. It is a company formed by the Government of India to acquire other companies which are of strategic importance.
• D. It is a company that is formed to raise money through an initial public offering to buy another company.

Answer 1

The correct option is D It is a company that is formed to raise money through an initial public offering to buy another company.

Explanation:

SPAC is formed to raise money through an initial public offering (IPOs) to buy another company. The aim of this SPAC is to raise money in an initial public offering (IPO), and at this point in time, it does not have any operations or revenues. Once the money is raised from the public, it is kept in an escrow account, which can be accessed while making the acquisition. If the acquisition is not made within two years of the IPO, the SPAC is delisted and the money is returned to the investors.